* Siemens sees I&C unit margin lifted by more than 100 bps
* Says has been eyeing Invensys Rail for a decade
* Analysts say price too high for Siemens
* Invensys shares up 9.6 pct, Siemens up 0.8 pct
By Maria Sheahan and Rhys Jones
FRANKFURT/LONDON, Nov 29 Germany's Siemens AG
promised investors its deal to buy Invensys'
rail business for a hefty 1.74 billion pounds ($2.78 billion)
would contribute to boosting profits in a tough economy.
The engineering conglomerate, Germany's most valuable
company, aims to save 6 billion euros ($7.75 billion) and focus
on its core areas of expertise to close a gap with rivals such
as ABB and General Electric.
Late on Wednesday, the company said it was buying Invensys
Rail and selling its baggage handling and postal sorting
operations as part of that plan.
The deals will lift the operating profit margin of Siemens'
Infrastructure & Cities division by more than one percentage
point in fiscal 2014 from 7.5 percent last year, I&C Chief
Executive Roland Busch said during a conference call on
"We are investing in our profitability. We see a margin
improvement ... as validation," Busch said.
The purchase of Invensys Rail vaults Siemens, which was
advised on the deal by Goldman Sachs, well ahead of rivals in
rail signalling, with a 17 percent market share, almost double
the closest rivals Alstom and Ansaldo STS.
The 1.74 billion pound price tag represents about 97 percent
of parent company Invensys' market value ahead of Wednesday's
announcement, or 15 times Invensys Rail's estimated 2013
operating profit, which analysts said seemed very high.
"We like the strategic intent of the deal, but we do not
like the pricing: the value is going to Invensys shareholders,"
Bernstein Research analysts said.
The deal gives Invensys cash to pay down its pension
deficit, return money to investors and re-focus its business on
industrial software, systems and control equipment.
Invensys shares closed 27 percent higher following the
announcement on Wednesday and were up 9.64 percent at 307.03
pence by 1052 GMT on Thursday. Siemens was up 0.8 percent at
Analysts have long expected Invensys to sell off some of its
business units because suitors interested in a takeover of the
entire group were put off by its hefty pension deficit, which
stood at a net 426 million pounds at the end of March. Analysts
had said the total liabilities were far higher than that.
Charles Stanley analyst Rae Ellingham believes Invensys may
now be a more attractive takeover target, after the bulk of its
pension problems were solved by the Siemens deal. The broker has
since raised its recommendation on the stock to 'accumulate'
Earlier this year, Invensys said it had received a "highly
preliminary" approach from U.S. group Emerson Electric,
but talks had ended. China South Locomotive has also reportedly
studied a bid for Invensys.
Siemens I&C chief Busch said the German company has been
eyeing Invensys Rail for a decade already and pounced on it now
because it saw an opportunity to buy it without taking on future