Siemens shareholders vote against sale of low-voltage motors business to parent, stock hits 52-week high

With this opposition, the larger view in the market now is that Siemens will have to revisit the terms and conditions of the deal and most likely also reconsider the valuation which had made investors antsy.

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Shares of Siemens rose 5 percent on July 31, hitting 52-week high at Rs 4066.10, after majority of shareholders voted against selling its low-voltage motors and geared motors business to Siemens Large Drives India, a subsidiary of Siemens AG.

Around 74 percent of the votes opposed the resolution to approve the transactions between the two companies, as per the exchange filing dated July 28.

With this opposition, the larger view in the market now is that the company will have to revisit the terms and conditions of the deal and most likely also reconsider the valuation which had made investors antsy. Siemens will have to find a middle ground for minority shareholders, some market participants said.

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At 9:24 am, shares of the company were up 4.7 percent at Rs 4,036.4 on the BSE.

In May, the company’s board of directors authorized the sale and transfer of its low voltage motors and geared motors businesses, along with related customer service operations, to a wholly-owned entity named Siemens Large Drives India, under Siemens AG. The deal was valued at Rs 2,200 crore and was scheduled to take effect on October 1, 2023.

Read more | Siemens India will continue to exit, acquire businesses to align to parent’s strategy: CEO

However, the transaction was subject to certain conditions agreed upon by both parties, which included obtaining necessary approvals from shareholders, statutory bodies, and regulatory authorities.

The business vertical that was considered for sale, added Rs 1,061 crore revenue and Rs 132 crore profit in FY22. It made up for 7 percent of the company’s revenue as well as 9 percent of its profits from operations.

Nomura had even downgraded its rating on shares of Siemens to ‘reduce’ from ‘neutral’ citing governance concerns arising on fairness of valuation for businesses being sold to the parent company. It explained that the valuation looked significantly lower than that ascribed by market.

Read more | Siemens’ motors biz divestment upsets street, management says it is ‘fair deal’

Despite a fairness opinion by bankers and auditors, it appears that the deal would be unattractive for minority shareholders, the foreign brokerage firm had highlighted. Additionally, the special dividend of Rs 1,600-1,700 crore post tax does not seem attractive to offset value lost for minorities, it had added.

According to Kotak Institutional Equities, with this sale transaction, Siemens is letting go a business with outsourced manufacturing that has grown at mid-to-single-digit CAGR (Compounded Annual Growth Rate) over the past decade. Whereas Jefferies had noted that although this segment is not considered significant for Siemens’ growth prospects in transmission and railways, its sale at a lower enterprise value-to-sales (EV/sales) ratio resulted in an implied loss of Rs 189 for investors.