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Siemens India
Overweight
SIEM.BO, SIEM IN
Follows ABB's footsteps, MNC parent to increase
stake to 75%, offer price of Rs930/share
• Action replay. Siemens AG has made an open offer to the public
shareholders of Siemens India for acquiring 19.82% stake at a price of
Rs930/share. The offer price is at a 27.7% premium to Friday’s closing
price. Siemens follows in ABB’s footsteps, the latter had announced an
open offer in May-10 to acquire 22.89% stake. The premium to previous
trading session closing price was 33.6% in case of ABB.
• Target shareholding 75%. Siemens AG holds 55.18% stake in Siemens
India and upon completion offer its shareholding will increase to 75%.
Like ABB, Siemens will continue to remain listed on the NSE and BSE
as current listing requirements entail minimum 10% public shareholding.
The offer opens on 25th Mar 2011 and closes on 13th April 2011.
• Rationale for the open offer as per Siemens AG. As per disclosures in
Economic Times today, a key objective of Siemens AG is to expand its
current operations and investments in India in connection with its
business strategy. To this extent, Siemens AG wishes to increase its stake
in Siemens India in order to develop the business effectively. The
advertisement further states, that Siemens AG has no plans to sell or
dispose its stake in Siemens India in the next two years, except decisions
taken in the normal course of business.
• Open offer dynamics. Assuming all shareholders which constitute free
float (44.8%) exercise the offer in proportion to their share holding (exSiemens AG), we can conclude that free float ex-LIC post open offer
may reduce to 17.35% vs. 31.1% currently. CMP of Rs835 (up 14.78%
intraday today) is trading ~4% below our Mar-12 DCF based fair value
(Rs870).
• Lesson from ABB (UW) price performance- in the medium term
fundamentals will take over: Post open offer announcement at Rs900,
the stock traded b/w Rs827-Rs882 levels. Since the completion of open
offer on 27th July, the stock corrected to Rs757 levels by 25th August.
Owing to successive quarters of weak operating results the stock is
currently trading at Rs732 levels (JPM Sep-11 fair value of Rs740).
• Stock view: We expect Siemens to remain range-bound at current levels
till the open offer is complete (13th April). See our recent upgrade of
Siemens India to OW- Growth levers in place, past concerns ease.
However, on account of superior operating performance track record in
recent quarters, comfort of healthy order book (15 months visibility) and
positive growth outlook, we do not expect the stock to correct (to ABB's
extent) post offer
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Siemens India
Overweight
SIEM.BO, SIEM IN
Follows ABB's footsteps, MNC parent to increase
stake to 75%, offer price of Rs930/share
• Action replay. Siemens AG has made an open offer to the public
shareholders of Siemens India for acquiring 19.82% stake at a price of
Rs930/share. The offer price is at a 27.7% premium to Friday’s closing
price. Siemens follows in ABB’s footsteps, the latter had announced an
open offer in May-10 to acquire 22.89% stake. The premium to previous
trading session closing price was 33.6% in case of ABB.
• Target shareholding 75%. Siemens AG holds 55.18% stake in Siemens
India and upon completion offer its shareholding will increase to 75%.
Like ABB, Siemens will continue to remain listed on the NSE and BSE
as current listing requirements entail minimum 10% public shareholding.
The offer opens on 25th Mar 2011 and closes on 13th April 2011.
• Rationale for the open offer as per Siemens AG. As per disclosures in
Economic Times today, a key objective of Siemens AG is to expand its
current operations and investments in India in connection with its
business strategy. To this extent, Siemens AG wishes to increase its stake
in Siemens India in order to develop the business effectively. The
advertisement further states, that Siemens AG has no plans to sell or
dispose its stake in Siemens India in the next two years, except decisions
taken in the normal course of business.
• Open offer dynamics. Assuming all shareholders which constitute free
float (44.8%) exercise the offer in proportion to their share holding (exSiemens AG), we can conclude that free float ex-LIC post open offer
may reduce to 17.35% vs. 31.1% currently. CMP of Rs835 (up 14.78%
intraday today) is trading ~4% below our Mar-12 DCF based fair value
(Rs870).
• Lesson from ABB (UW) price performance- in the medium term
fundamentals will take over: Post open offer announcement at Rs900,
the stock traded b/w Rs827-Rs882 levels. Since the completion of open
offer on 27th July, the stock corrected to Rs757 levels by 25th August.
Owing to successive quarters of weak operating results the stock is
currently trading at Rs732 levels (JPM Sep-11 fair value of Rs740).
• Stock view: We expect Siemens to remain range-bound at current levels
till the open offer is complete (13th April). See our recent upgrade of
Siemens India to OW- Growth levers in place, past concerns ease.
However, on account of superior operating performance track record in
recent quarters, comfort of healthy order book (15 months visibility) and
positive growth outlook, we do not expect the stock to correct (to ABB's
extent) post offer
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