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To: TobagoJack who wrote (34206)	5/22/2003 4:52:57 AM
From: elmatador	Respond to of 74559

€2.5bn Siemens bond sparks acquisition rumours By Bertrand Benoit in Frankfurt Published: May 22 2003 9:17 \| Last Updated: May 22 2003 9:17 Siemens took bond and equity investors by surprise on Thursday when it said it had launched €2.5bn worth of seven-year bonds convertible into 45m shares. While the German engineering and electronics groups insisted the transaction, its biggest debt issue since June 2001, was "opportunistic", the news sparked speculation about possible acquisitions. "They would say they need to prepare for the return of growth, that the money is cheap, that they should not wait until they need it," said James Stettler, analyst at Dresdner Kleinwort Wasserstein. "But they must have something up their sleeves somewhere down the line." << Cheap money. Cheap assets>> With virtually no net debt at the end of last year, Siemens has one of the most solid balance sheets in the capital goods sector and has made no secrets of its desire to beef up some of its businesses through acquisitions. Last month, the group's power generation unit agreed to acquire the industrial turbine activities of Alstom of France for €1.1bn in a two-step transaction, the first of which has now been completed. <<My bet is Siemens will buy more chunks of Alstom rail business perhaps>> Heinrich von Pierer, chief executive, and Heinz-Joachim Neubu[umlaut]rger, finance director, have both said they would look at possible deals to boost the group's process automation division, one of its weakest in competitive terms. While the group has been eyeing Invensys of the UK, which is shedding two thirds of its businesses to cut debt, it is thought to be more interested in those activities that are not being auctioned off. One Siemens insider sought to play down expectations of an imminent deal, however, arguing that the decision to launch the bond had been motivated primarily by low interest rates. "This is basically very cheap money, look at the coupon, round about 1 per cent, there is no way to get cheaper money at the moment and the market is not crowded," this person said. Although Mr von Pierer has insisted in recent conversations with analysts that he would not endanger the group's credit rating with an oversized acquisition, the bond issue, coupled with the Alstrom deal, will slightly weaken Siemens' balance sheet. Unlike mandatory convertible bonds, plain convertible securities are considered pure debt by rating agencies. Siemens had gross debt of €12.34bn and liquid assets of €11.2bn at the end of its 2002 fiscal year. The group said the bond, which will not be callable for its first four years, would carry a coupon of 0.875 per cent to 1.375 per cent and a conversion premium of 45 per cent to 50 per cent, with the final pricing expected to be announced late on Thursday. Full conversion would result in a 5 per cent dilution for Siemens' shareholders. News of the issue sent shares in Siemens down 71 cents, or 1.8 per cent, to €38.74 in early Frankfurt trading.