BREAKINGVIEWS-Siemens Energy can wait out its activist

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Yawen Chen

LONDON, Dec 15 (Reuters Breakingviews) - Siemens Energy ENR1n.DE looks like an activist’s ideal target. The 104-billion-euro ($122 billion) German turbine maker is benefiting from an AI-driven surge in electricity demand, yet it still trades at a steep discount to U.S. rival GE Vernova GEV.N. Despite a 130% rally in the past year, Siemens Energy’s shares reflect lingering doubts over whether growth in its core businesses can fully offset uncertainty in the wind unit.

Ananym Capital Management reckons it has the answer. In a letter seen by Breakingviews, the U.S. activist argues that Siemens Energy’s loss-making wind unit is the main drag on its shares. It is therefore asking CEO Christian Bruch to launch a strategic review aimed at separating Siemens Gamesa via "a spin-off or other means". That, it says, will create a cleaner, AI-driven equity story.

The math is appealing. Gas Services and Grid Technologies are expected to generate roughly 4 billion euros of EBITDA each by 2028, according to Visible Alpha. At 16.5 times EBITDA using Ananym assumptions, those businesses alone imply enterprise values of about 66 billion euros a piece. Add roughly 12 billion euros for Transformation of Industry - another segment that focuses on decarbonising the industrial sector - at 12 times EBITDA. Then factor in about 8 billion euros for the wind unit - valued at 7 times EBITDA in line with Vestas Wind Systems VWS.CO - and throw in over 5 billion euros of net cash, and it implies an equity value of 158 billion euros. That's over 50% above the current market capitalisation, according to Breakingviews calculations.

But the numbers hardly argue for immediate action. Under the activist’s own framework, the wind business contributes only a small share of potential upside. Recent history also suggests there is more value in being patient. Only a few years ago, gas turbines were seen as stranded assets. Today, data centre demand has turned them into Siemens Energy’s main growth engine. Management argues the wind business could follow a similar path, with renewables expected to supply more than 60% of global power by the mid-century, according to McKinsey. That suggests retaining the unit preserves strategic optionality.

The GE Vernova comparison is imperfect too. While Ananym says the two groups are strikingly similar other than their wind fortunes, GE Vernova generates about 42% of its revenue in the United States versus Siemens Energy’s 22%. The U.S. benefits from faster electricity demand growth and therefore a company with greater exposure warrants a higher multiple.

Meanwhile, wind itself is improving. Siemens Energy expects the unit to return to profit by 2026. Carving up the group just as the business turns the corner risks locking in losses rather than unlocking value. For now, the smarter move is to finish the recovery before reaching for the carving knife.

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CONTEXT NEWS

U.S.-based activist investor Ananym Capital said on December 9 that it has taken a stake in German power equipment manufacturer Siemens Energy and is asking the group's management to review its loss-making wind division.

Ananym said it believes such a spinoff would result in immediate value creation of more than 40%, adding that the wind unit’s impending profitability inflection point suggests it’s the right time to begin the review, according to a letter seen by Breakingviews.

Siemens Energy said in a statement on the same day that it "values constructive input for creating sustainable value for shareholders, employees, customers and partners", and that it had addressed the development of its wind unit at a recent capital markets day.

(Editing by Aimee Donnellan; Production by Shrabani Chakraborty)

((For previous columns by the author, Reuters customers can click on CHEN/yawen.chen@thomsonreuters.com))