Germany's Siemens presents long-awaited overhaul

BERLIN Tue May 6, 2014 6:24pm EDT

The company logo of Siemens is pictured after an annual news conference in Berlin November 7, 2013. REUTERS/Tobias Schwarz

The company logo of Siemens is pictured after an annual news conference in Berlin November 7, 2013.

Credit: Reuters/Tobias Schwarz

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BERLIN (Reuters) - German conglomerate Siemens (SIEGn.DE) unveiled a long awaited corporate overhaul on Tuesday under which the company will be restructured into nine divisions, its healthcare unit managed separately, and its hearing aids business publicly listed.

The measures are part of a new strategy to be formally unveiled at the firm's historic "Siemensstadt" site in Berlin on Wednesday by Chief Executive Joe Kaeser, who took the reins of the company last summer following a boardroom coup.

The presentation comes at a time when Siemens is considering submitting a formal offer for the energy business of French rival Alstom (ALSO.PA), which has already received a $16.9 billion bid from U.S. giant General Electric (GE.N).

Siemens confirmed on Tuesday that it was buying the aero-derivative gas turbine and compressor business of Rolls-Royce (RR.L) for roughly 950 million euros ($1.32 billion).

Under that deal, Siemens will pay an additional 240 million euros to secure exclusive access to future Rolls-Royce aero-turbine technology and preferred access to supply and engineering services for a 25-year period.

Kaeser, a 34-year veteran of Siemens who previously served as its finance chief, has vowed to restore the sense of pride at a company that has lagged big competitors like GE and Philips (PHG.AS) in terms of innovation and profitability.

According to Reuters data, Siemens currently trades at a 7.3 percent discount to its major European peers on a 12-month forward EV/EBITDA basis.

Kaeser's predecessor Peter Loescher was ousted last July after a series of profit warnings, costly contract delays and an aggressive drive for growth which left Siemens with a lumbering portfolio of businesses.

"In the future, Siemens AG will position itself along electrification, automation and digitalization, where it has identified growth fields in which it sees its maximum long-term potential," the company said in a statement on Tuesday.

The measures, which include a streamlining of human resources and communications functions, are expected to generate productivity gains of 1 billion euros per year, effective from the end of fiscal 2016.

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The four big business sectors -- industry, energy, healthcare and infrastructure -- that Loescher introduced will be abolished and the divisions reduced to nine from 16.

The new divisions include: power and gas, wind power and renewables, energy management, building technologies, mobility, digital factory, process industries, power generation services and financial services.

Healthcare, a business that Siemens has thought about spinning off in the past, will be managed as a separate business under the Siemens umbrella.

The hearing aids, or audiology, business will be spun off and publicly listed. Siemens does not break out sales or profits for the unit.

As part of the changes, Micheal Suess, head of the energy business and a management board member, will leave the company. Lisa Davis, currently an executive vice president Royal Dutch Shell (RDSa.L), will take his place on the board and run three energy-focused divisions from the United States.

Siemens traces its roots to an electrical telegraph company founded by Werner von Siemens in Berlin in 1847.

Siemensstadt is a massive industrial and residential site that Siemens built in the early decades of the 20th century to bring together its scattered factories and offices in the German capital.

Located in a remote area between the districts of Charlottenburg and Spandau, it was the site of the company's headquarters from 1914 to 1949.

(Reporting by Noah Barkin)

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