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Shareholders of Siemens vote against selling the low-voltage motors business to the parent company

Jul 31, 2023

By: BlinkX Research Team

After a majority of shareholders voted against selling Siemens' low-voltage motors and geared motors business to Siemens Large Drives India, a subsidiary of Siemens AG, the company's shares increased 5% on July 31, reaching a 52-week high of Rs 4066.10.

According to the exchange filing dated July 28 over 74% of the votes were against the resolution for approving the transactions between the two companies.

The board of directors of the company approved the sale and transfer of its low voltage motors and geared motors businesses, as well as any related customer support activities, in May to a wholly-owned entity called Siemens Large Drives India, which is a subsidiary of Siemens AG. The deal, which was worth Rs 2,200 crore, was scheduled to go into effect on October 1st, 2023.

The parties agreed a number of terms, which included obtaining the required shareholder, statutory, and regulatory approvals for the deal.

In FY22, the business vertical that was under consideration for sale generated Rs 1,061 crore in revenue and Rs 132 crore in profit. It accounted for 7% of the company's revenue as well as 9% of its operating profit.

Nomura even lowered the rating for Siemens shares from "neutral" to "reduce" due to concerns about governance and the fairness of valuation for businesses that were being sold to the parent company. It explained why the valuation appeared to be far lower than what the market had assigned.

The foreign brokerage firm had noted that the acquisition appeared to be unfavorable for minority shareholders notwithstanding a fairness judgment from bankers and auditors. In addition, it had stated, the special dividend of Rs 1,600-1,700 crore after taxes does not appear alluring enough make up for value loss for minorities.

Source: Media Reports