Siemens to Carve Out Large Drives Applications Unit

Siemens to Carve Out Large Drives Applications Unit

Reuters and Dow Jones report that Siemens is preparing a separation of its Large Drive Applications (LDA) business.

The German industrial and technology company will spin off the activities of its LDA division, which makes heavy-duty drive systems for ships, mines, and mills, into separate legal entities, a Siemens spokesman told Dow Jones Newswires.

“LDA is one of the leading players in the market and in a strong position overall and has performed very well in recent months,” the spokesman said. “We have now decided to carve out the LDA activities into separate legal entities. We want to give this business additional autonomy and entrepreneurial freedom so that it can focus more sharply on its markets and customers.”

The separation of the unit is the first step to a divestiture, Handelsblatt, a German newspaper, reported on Monday.

More than 7000 Siemens employees around the world including around 2200 in Germany will be affected by the move, Handelsblatt reported, citing sources at the company.

The unit is part of Siemens’ so-called portfolio businesses – operations which the company wants to either improve or sell off in the future.

The company declined to give financial details of the business. The spokesman also declined to comment on further options for the business, and whether the spin-off was a prelude to finding a partner for LDA or selling the business outright.

The move would be the latest part of the reshaping of Siemens under CEO Roland Busch, who has concentrated on digital and software-based acquisitions since taking charge at the Munich-based company in February.

Siemens has focused on factory automation, transportation, and building technology in recent years, and exited sectors such as medical devices and power generation with the flotation of Siemens Healthineers and Siemens Energy.

“Weak margins and returns are a valid concern, as these metrics typically correlate strongly to forward multiples, but Siemens’ future cash flow generation looks better,” Stephen Simpson writes in a bullish analysis posted on Seeking Alpha.

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