Reuters, along with various other business publications, is reporting Siemens AG has approached Emerson Electric Company to explore buying the network power operations for as much as $4 billion.
Citing people familiar with the situation, Reuters reports Emerson wants to remove itself from the power business and concentrate on its industrial automation business, along with its commercial and residential heating and air conditioning business. Emerson did make an announcement nearly a year ago that it was looking to shed its power business. That includes making equipment that stops systems from failing, surge prevention, uninterruptible power supplies and cooling systems.
Reuters also reports that the people it is using as sources say no deal is imminent, but something may happen later this year. The sources are asking to remain confidential because negotiations are continuing.
Emerson’s chief rivals in network power are Eaton and Schneider Electric, with its main customers being operators of data centers and telecom networks. Analysts say the $4 billion price would be 0.9 times the 2015 sales and 18 times EBIT (earnings before interest and tax). An analyst at Barclays told Reuters that Siemens would be able to combine some of its products with Emerson’s. Emerson’s network power sales dropped 1% in the 2015 fourth quarter, calling it “mixed conditions in data centre and telecommunications infrastructure spending”. Its earnings have been hit by a strong dollar and a drop in oil prices, which have slowed down spending by customers. The same can be said for Emerson’s rivals like General Electric Company and Rockwell Automation.
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