Siemens’ offer for DRC puts the spotlight on M&A within the broader oilfield equipment space. We explore the value to DRC as well as potential valuation upside for other energy equipment names, many of which have lagged.
Siemens’ offer for DRC: DRC has agreed to sell itself to Siemens for ~$7.6bn, or $83/share. This is the largest transaction in our space since ESV’s acquisition of Pride in 2010. The proposed offer values DRC’s business at 17.4x LTM EBITDA and 15.8x FY1 EBITDA, near the high end of multiples among sizeable transactions in our space. See page 3 for our M&A tracker table.
DRC to benefit from Siemens’ scale. DRC management has highlighted that the merger with Siemens will allow DRC to leverage Siemens’ larger footprint to (i) market and accelerate development of its suite of technologies, (ii) provide cross-selling opportunities for Siemens’ products under the DRC brand name. We note that Siemens’ reported $83 offer
is about a 40% premium to where DRC traded several months ago prior to deal speculation, and 14% above where it closed on Wednesday following Sulzer’s announcement that it was in talks with DRC.
M&A in Oil Services: The most recent major deal in our space occurred when GE acquired Lufkin over a year ago. With the S&P500 at an all-time high and offshore equipment names continuing to lag, more M&A may come to pass. On p. 2, we explore the hypothetical upside if the market were to value equipment names at multiples comparable to DRC’s
imputed acquisition multiple. However, we are currently aware of no deals involving these companies.