Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: EC approves acquisition of Dresser-Rand by Siemens, (Jun 29, 2015)

By Linda O’Brien, J.D., LL.M.

The European Commission (EC) has cleared under the European Union (EU) merger regulation the proposed acquisition of rotating equipment manufacturer Dresser-Rand of the U.S. by Siemens of Germany, the EC announced today. Both companies supply turbo compressors as well as the engines which drive those compressors.

There are different kinds of drivers including aero-derivative gas turbines (ADGT), industrial gas turbines (IGT), steam turbines, and electric motors. The combination of a turbo compressor with a driver is called a turbo compressor train. Turbo compressor trains are widely used for various applications in the oil and gas industry, i.e., exploration and production of oil and gas, their transport and storage, as well as for the refining and production of various oil and gas products.

The Commission had concerns that the transaction would reduce from three to two the number of significant suppliers of ADGT drivers, turbo compressors, and turbo compressor trains driven by ADGTs. The initial investigation also indicated that the parties' competitors for the supply of small steam turbines of less than 5 MW have a limited presence and do not pose a significant competitive constraint on the parties. These two concerns could lead to less product variety and ultimately higher prices.

After an in-depth investigation launched in February 2015, the Commission has concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.

Siemens is a German company headquartered in Munich, which offers a wide range of products and services through a number of business divisions. Siemens' product portfolio includes gas turbines, steam turbines, generators, and compressors. Siemens also produces electric motors.

Dresser-Rand is a U.S. public company headquartered in Houston, Texas. Founded in 2004, Dresser-Rand focuses on supplying customers in the oil and gas sector and in particular for upstream exploration and production, midstream transportation, liquefied natural gas (LNG) and gas storage applications, and downstream refinery processes, as well as distribution of oil and gas related by-products. Dresser-Rand's product portfolio includes centrifugal and reciprocating gas compressors, small gas and steam turbines, gas expanders, gas and diesel engines and associated control panels.

"After a detailed assessment of the markets involved, the Commission is satisfied that European consumers will not be negatively affected by the merger,” said Margrethe Vestager, Commissioner in charge of competitive policy. “Today's decision proves that even after an in-depth analysis, the Commission can unconditionally approve a merger if it does not have a negative effect on competition."

In a press release, Lisa Davis, member of the Managing Board of Siemens AG, said, “With Dresser-Rand on board, we now have a comprehensive portfolio of equipment and capability for the oil and gas industry and a much expanded installed base, allowing us to address the needs of the market with world-class products, solutions and services. The current level of oil prices increases the focus of our customers for ways to reduce costs. So despite the challenges of a low oil price, this also brings opportunities as we focus our efforts on offers that reduce costs and increase efficiency. The long-term growth trajectory for oil and gas remains intact."

Dresser-Rand's business—together with Siemens' compressor unit and the related service business—will form a new Dresser-Rand unit within Siemens Power and Gas Division with a primary focus on the oil and gas industry. Since all regulatory approvals required to complete the transaction have now been obtained, Siemens plans to close the $7.8 billion transaction by the end of June 2015.

Companies: Siemens AG; Dresser-Rand Group Inc.

News: AcquisitionsMergers Antitrust