Siemens to Spin-Off Gas and Power Division, Focus on Profitability

By David Humphrey

Category:
Company and Product News

Siemens announced that it intends to meet its medium-term growth and profit targets by focusing its portfolio on dynamic growth markets and efficiency gains.  To this end, the Supervisory Board of Siemens AG unanimously approved the next steps in the company’s Vision 2020+ strategy concept, including the spinoff of Siemens’ Gas and Power (GP).

The success of Siemens’ businesses of the next generation will be determined by new factors.  The breadth, size and a ‘one size fits all’ approach will be replaced by focus, speed and adaptability.  Siemens emphasized that it was setting the course for the future from a position of strength and was excellently positioned.  In the growth markets of automation, industrial digitalization and smart infrastructure, Siemens wants to grow significantly and further expand its leading position.

The Digital Industries (DI) and Smart Infrastructure (SI) Operating Companies will comprise Siemens’ future industrial core.  This core will be supplemented by company-wide technology and service units and the company’s strategic majority stake in Siemens Healthineers. Siemens Mobility is also to be further strengthened as a growth business.

 Siemens’ Gas and Power to be separately managed Siemens’ Gas and Power (GP) – comprising the company’s oil and gas, conventional power generation, power transmission and related services businesses – is to be given complete independence and entrepreneurial freedom through a carveout and a subsequent public listing (spinoff). In addition, Siemens AG plans to contribute its majority stake in the market-leading renewable energies company SGRE – currently 59 percent – to GP.

Plans call for the stock exchange listing to take place by September 2020.  Siemens will also give up its majority stake in GP.  However, it will remain a strong anchor shareholder in the new company, with a stake that is to be initially somewhat less than 50 percent and, for the foreseeable future, above the level of a blocking minority holding.

David Humphrey, ARC Advisory Group, commented, “Once again, Siemens proves that it won’t shy away from bold decisions that keep the company focused and profit-driven.  CEO Joe Kaeser recognizes that sheer size no longer guarantees success, and that adaptability is the best strategy for an industrial company to survive and thrive in the future.  While the spin-off of GP nearly halves core revenue, the two remaining operating companies are expected to achieve much higher profit margins.  While Siemens maintains controlling stakes in its spin-offs, their ultimate fate will be left to the next Siemens CEO after Kaeser’s contract expires in 2021.”

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