GCTAY Siemens Gamesa Renewable Energy (PK)

By Christopher Alessi and Carlos Lopez-Perea 

MADRID--Spain's Gamesa Corporación Tecnológica SA said on Friday it had agreed in principle to combine its wind power activities with those of the German engineering group Siemens AG, in a deal that would create the world's largest producer of wind-turbines.

Gamesa has given "the necessary corporate approval" for the merger, the Spanish company said in a statement sent to Spain's stock market regulator. The final terms of the deal must still be finalized, the statement noted.

The regulator then suspended trade in Gamesa shares, which had closed Thursday at EUR17.10 ($19.23) after rising 0.8% on the day.

Siemens shares closed up slightly on Thursday, at EUR90.89, and were up 1.6% in early morning trading on Friday.

Siemens declined to comment Friday morning.

Gamesa's announcement followed months of negotiations between the two companies.

Siemens and Gamesa had, in February, agreed in principle to combine their wind businesses but the tie-up was delayed because Gamesa needed to renegotiate part of an offshore wind joint venture, known as Adwen, with French nuclear-engineering company Areva SA.

The Wall Street Journal on Wednesday reported that the issues surrounding Adwen had been in resolved in principle, according to people familiar with the matter, and that Siemens and Gamesa were close to announcing the long-anticipated deal.

As part of the agreement, Siemens could transfer its offshore wind activities to the Spanish company in exchange for a stake of about 60% in a future enlarged business, the people said. The companies would also likely seek a buyer for Adwen as part of that agreement, though Adwen would be integrated into Siemens' and Gamesa's future combined business if no buyer is found, these people explained.

The new entity would likely have a market capitalization of roughly EUR10 billion, remain listed on the Madrid Stock Exchange and be led by Gamesa Chairman Ignacio Martin, the sources said.

The agreement would create a new global market leader in wind energy by capacity, surpassing China's Xinjiang Goldwind Science & Technology Co., Denmark's Vestas Wind Systems A/S and General Electric Co., according to FTI Consulting.

While the deal needs to be approved by Gamesa shareholders, who will convene at the company's headquarters in Zamudio in northern Spain next week, a vote on approval is likely to wait on finalization of the terms of the deal.

Areva on Wednesday separately announced plans to split the state-controlled nuclear-engineering group in three, as part of a comprehensive restructuring plan that would see the company sell its renewable energy assets overtime.

Monica Houston-Waesch and Eyk Henning also contributed to this article.

Write to Christopher Alessi at christopher.alessi@wsj.com and Carlos Lopez-Perea at carlos.perea@wsj.com

(END) Dow Jones Newswires

June 17, 2016 06:06 ET (10:06 GMT)

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