Gamesa Shares Surge as Siemens Energy Confirms Mulling Tender Offer

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Gamesa Shares Surge as Siemens Energy Confirms Mulling Tender Offer
Credit: © Reuters.

By Geoffrey Smith

Investing.com -- Shares in Siemens Gamesa Renewable Energy (BME: SGREN ) surged to their highest in nearly a month on Wednesday after its German majority owner, Siemens Energy (ETR: ENR1n ), confirmed media reports that it is considering a tender offer to bring the wind turbine maker completely under its control.

Siemens Energy's statement added no further details beyond saying that nothing was guaranteed.

Gamesa stock rose 11.5% in Madrid but is still trading at less than half of its 2021 peak. Siemens Energy stock, meanwhile, rose 2.8%.

Gamesa is perhaps the most important part of Siemens Energy, a segment with a strong secular growth outlook due to the worldwide shift away from fossil fuels to renewable sources of electricity generation. Four countries bordering the North Sea, Belgium, the Netherlands, Germany, and Denmark, announced on Wednesday that they intend to have 150 gigawatts of offshore wind turbine capacity - Gamesa's strongest segment - installed by 2050.

By contrast, most of the rest of Siemens Energy's business consists largely of making fossil fuel power stations, a business in long-term decline in the developed world. Gamesa's problems have been largely responsible for the 20% decline in the company's stock price since its German conglomerate parent spun it off two years ago.

Gamesa's financial problems have worsened steadily over the last two years as surging commodity prices and various shortages of essential components have squeezed its margins hard.

Last month, Gamesa had launched a restructuring plan to try to address its problems, which have led it to issue three profit warnings in the last year and make delay to a number of important projects.

Gamesa isn't the only turbine maker in trouble. Earlier this month, Danish rival Vestas Wind Systems (CSE: VWS ) said it expected to lose money before interest and taxes this year despite record demand for its products. It cut its dividend as a consequence.

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