Siemens AG (SI) has decided to acquire Republic Intelligent Transportation Services Inc., headquartered in Novato, California, in an all-cash deal. Terms and conditions of the deal were not disclosed.
The target will become part of the Transportation business of the Mobility Division of Siemens Industry group and will be closely aligned with its Intelligent Traffic Solutions business. Siemens shows its commitment to strengthen its position in the transportation business through this acquisition. The target company is a leader in the US transportation services. Republic’s expertise is expected to augment Siemens’ technological capabilities and traffic management solutions.
Siemens is a global leader in most of its key businesses, including industrial automation, power generation, medical equipment and transportation. Given its product breadth and geographical diversity, the company should be a major beneficiary of increased spending as developing nations build up their infrastructure. Its core businesses have seen a pickup in demand and the company is well positioned in areas such as Brazil, Russia, India and China, where growth is the fastest.
Its first competitive strength lies in emerging markets. In the first half of 2010, 30% of businesses were in the emerging markets, which compares to 19% during the downturn of 2001. The company has built out its headcount in low-cost countries. In 2001, it was only 14% of its global headcount base. Today, it is 25%. It is increasing not just its physical presence from a distribution and marketing standpoint, but also its manufacturing footprint, allowing it to optimize its global cost structures from a global supply chain standpoint. Roughly 20% of its global sourcing requirements are coming out of low-cost countries.
Global macroeconomic and financing conditions continue to reduce consumer spending, business confidence and capital expenditures. This was particularly evident in such short-cycle industries as automotive, manufacturing and lighting. Longer-cycle energy and infrastructure customers postponed potential new business.
Siemens AG is a German industrial conglomerate with interests in information services, automation and controls, medical equipment, power generation, transportation systems, automotive electronics, lighting, and many other areas. With a focus on electronics and electrical engineering, the company is a major multinational with over 405,000 employees in more than 190 countries.
We currently have an Outperform recommendation on Siemens.
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