General Electric (NYSE:GE)
Graphique Historique de l'Action
6 Mois : De Avr 2019 à Oct 2019
Shares climb as firm aims to boost profit by spinning off troubled power unit
By Ruth Bender
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 9, 2019).
BERLIN -- Siemens AG shares rose sharply, a day after it disclosed plans to spin off its struggling gas and power business -- part of a broader shake-up that people familiar with the company's thinking say has been triggered in part by worry over activist investors.
The move also comes as Siemens executives watch its longtime American rival General Electric Co. contend with a series of crises, including an attempt to turn around its own power business.
Investors sent Siemens' stock up more than 4%, after Siemens late Tuesday said it would combine the unit that includes its gas turbines business with its renewable-energy activities and spin off the resulting entity. It is the company's most dramatic overhaul since it exited the telecommunications business in 2006.
"This is a transformation of our company's DNA...it wasn't easy," the Siemens' CEO Joe Kaeser said Wednesday, presenting a set of second-quarter earnings that trumped analyst expectations, further boosting the stock.
The idea of shedding the power and gas business -- long a core business steeped in Siemens' history as a German industrial conglomerate -- seemed far-fetched just a few years ago. But Mr. Kaeser has pushed to show he and his fellow directors are ready to reshape Siemens into a simpler and more profitable company.
The move also represents the first time in a recent series of spinoffs initiated by Mr. Kaeser where Siemens clearly stated that it doesn't intend to retain a majority stake in the resulting business.
Mr. Kaeser's approach has ruffled political feathers in Germany and drawn workforce criticism in the tradition-minded country. Works-council representatives on Siemens' supervisory board backed the latest move, but also warned that Siemens had a responsibility to retain jobs and retrain people for new jobs.
Siemens said it plans to create 20,500 new jobs in areas from electric mobility to industrial automation, partially offsetting some 10,400 cuts in other areas. Mr. Kaeser said repeatedly Wednesday that the company remained committed to its employees and creating jobs.
People familiar with Siemens' strategy say the company feared aggressive, outside investors would end up agitating for a breakup if the company failed to further simplify or find a solution to improve profits at the power business. Activists investors, including a handful from the U.S. have swept across Europe, pushing boardroom change in companies like French drinks maker Pernod Ricard SA and German steel-to-elevator conglomerate Thyssenkrupp AG. Mr. Kaeser said the carve-out and planned listing of the new energy company didn't preclude other strategic options in the future, such as partnerships with rivals.
GE, too, was taken off guard by slumping demand in its power business, contributing to a deep crisis at the U.S. rival. For years, Siemens' managers lived in GE's shadow. The American company long enjoyed a larger market value. After GE's long share price slump, Siemens's market cap is now slightly larger than GE's.
In spinning off the power business, Siemens is taking a different tack than GE, which is in the midst of a major overhaul prioritizing that division.
"We know that some competitors and rival CEOs had to experience what happens when you run out of options," Mr. Kaeser told reporters Tuesday, not mentioning GE by name. "We wanted to remain proactive and anticipate the transformation," Mr. Kaeser said.
Siemens, whose activities once stretched from mobile phones to lightbulbs, has been facing calls from investors to extract more value from its different businesses for years.
Under Mr. Kaeser, Siemens spun off its renewable-energy business Gamesa, carved-out and listed its still majority-owned medical equipment unit Siemens Healthineers and reshuffled its remaining business units in a plan launched last summer. But many analysts have called for more.
"We have been arguing for some time that Siemens should and would become simpler," said Jefferies analyst Peter Reilly. "We regard this as a major step in the right direction."
JPMorgan Chase & Co. analysts said the move could reduce Siemens' "conglomerate discount" over time and that the company's future industrial focus on digital industries should attract long-term investors to the stock.
Mr. Kaeser said it was crucial for Siemens to take the time to complete its restructuring, which saw it consolidate its five industrial business units into three: power turbines and gas; manufacturing software and automation; and infrastructure in a digital world. After the spinoff Siemens will be left with the latter two, centered on connecting factories and urban infrastructure to the internet.
Write to Ruth Bender at Ruth.Bender@wsj.com
(END) Dow Jones Newswires
May 09, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.