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Siemens and Gamesa to create €9.3bn wind power giant

Siemens and Gamesa have signed binding agreements to merge Siemens's wind power business, including wind services, with Gamesa in a deal that will see the German industrial firm owning 59% of the new global wind power player. 

As part of the merger, Siemens will fund a €1bn ($1.13bn) cash payment of €3.75 per share, which will be distributed to Gamesa's shareholders (excluding Siemens) immediately following the completion of the merger (net of any ordinary dividends paid until completion of the merger), the two companies said in a joint release.

The cash payment represents 26% of Gamesa's unaffected share price at market close on January 28, 2016.

"The combination of our wind business with Gamesa follows a clear and compelling industrial logic in an attractive growth industry, in which scale is a key to making renewable energy more cost-effective," Siemens chief executive Joe Kaeser says.

Global headquarters of the merged company will be in Spain and it will remain listed in Spain, but consolidated in Siemens' financial statements. "We will continue to work as before, albeit as part of a stronger company and with an enhanced ability to offer all of our customers end-to-end solutions," says Gamesa chief executive Ignacio Martín.

The new wind power major is expected to have 69GW installed base worldwide, an order backlog of around €20bn, revenue of €9.3bn and adjusted earnings before interest and taxes, or Ebit, of €839m. Those figures are on a pro forma basis (last twelve months as of March 2016).

Offshore headquarters will reside in Hamburg, Germany, and Vejle, Denmark, but the final set-up of the merged company's offshore business isn't certain yet.

Siemens currently has an overwhelming market share in the global offshore wind turbine market, while Gamesa holds a 50% stake in the Adwen offshore wind turbine joint venture with French energy firm Areva.

Gamesa and Areva have entered into contractual agreements whereby Areva waives existing contractual restrictions in Adwen, simplifying the merger between Gamesa and Siemens.

As part of these agreements, Gamesa grants Areva a put option for Areva's 50% stake and a call option for Gamesa's 50% stake in Adwen. Both options expire in three months. Alternatively, Areva can in this time divest 100% of Adwen to a third party via a drag-along right for Gamesa's stake.

The latter could be a chance for US industrial conglomerate General Electric to rise to become the Nr. 3 in global offshore wind by buying Adwen.

GE yesterday confirmed to Recharge that it is in talks with all the involved companies and the French state over Adwen.

Siemens and Gamesa expect annual Ebit synergies of €230m per year in year four after the closing of the deal.

Gamesa's current top shareholder, Spanish utility Iberdrola, has entered into a shareholder agreement with Siemens and will hold some 8% in the combined company.

The transaction is expected to close in the first quarter of 2017 and is subject to approval by Gamesa shareholders and competition authorities.

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