UPDATE 3-Siemens buys Invensys Rail as part of overhaul

Wed Nov 28, 2012 4:15pm EST

Related Topics

* Siemens pays 1.74 bln stg for Invensys Rail

* Invensys to return 625 mln stg to investors

* Siemens to divest baggage handling, postal sorting ops

* Siemens says to spin off 80.5 pct of Osram

* Siemens says expects to return to profit growth in 2014 (Adds analyst comments, 2014 profit outlook from regulatory filing)

FRANKFURT, Nov 28 (Reuters) - Germany's Siemens AG struck a deal to buy Invensys' rail business for 1.74 billion pounds ($2.8 billion) as part of a major overhaul to focus on its core expertise and boost productivity.

The deal will give Siemens access to Invensys' customers in Britain, Spain, the United States and Australia and will result in synergies of more than 100 million euros ($129.10 million) by 2018, Siemens said on Wednesday.

Shares in Invensys closed 27 percent higher at 290 pence in London as the British company said the sale of Invensys Rail, which makes signalling systems, would allow it to return 625 million pounds, or 76 pence per share, to its investors.

Siemens, Germany's most valuable company, announced plans earlier this month to save 6 billion euros over two years and raise productivity to close a gap with rivals such as ABB and General Electric.

As part of the programme, it aims to divest businesses that do not generate competitive returns and buy assets that can bolster its core businesses, such as industry automation.

But some analysts said they saw the deal for Invensys Rail as expensive, with Siemens paying about 15 times estimated 2013 operating profit for the business.

"If ever there was a signal to the market on what (the savings programme) 'Siemens 2014' means, this is it: the portfolio reinforcement is not going to be cheap," Bernstein Research analyst said.

Analysts at Bank of America Merrill Lynch said they suspected Siemens had agreed to the deal partly to prevent its rivals from getting their hands on Invensys Rail.

RESTRUCTURING AHEAD

Siemens, which makes products ranging from fast trains and gas turbines to hearing aids, also said on Wednesday it was divesting its baggage handling, postal and parcel sorting businesses - with total annual revenue of about 900 million euros - and would give 80.5 percent of its Osram lighting unit to shareholders in a planned spin-off.

Chief Executive Peter Loescher declared two years ago that Siemens had become a "normal company" and that years of restructuring and volatility were over. But he recently warned that the company had to make deep cuts to stay competitive.

Aside from spinning off most of Osram, the world's No.2 lighting company after Philips, Siemens is selling businesses including its solar and waste water treatment units.

The deals are taking some of the sheen off Siemens' push to become a major player in green technology. The company said in a regulatory statement published late on Wednesday that it has become much more challenging to reach its goal of growing revenue from its Environmental Portfolio to more than 40 billion euros in fiscal 2014 from 33 billion euros in 2012.

Excluding major portfolio changes, Siemens sees its profit from continuing operations returning to strong growth in its fiscal year through September 2014, it said in the statement.

That is after an expected decline in 2013 profit to 4.5-5.0 billion euros, including 1 billion euros of charges related to the savings programme, from 5.18 billion euros last year.

($1 = 0.7746 euros)

($1 = 0.6257 British pounds) (Reporting by Maria Sheahan; Additional reporting by Rhys Jones; Editing by Mike Nesbit, Helen Massy-Beresford and Gunna Dickson)

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