Siemens CEO wary of activist investors
Kaeser wants to strike right balance between financial results and building for the future
By his own admission, Siemens AG chief executive officer Joe Kaeser is working to keep activist investors at bay.
As a host of prominent European manufacturers — with historic roots in countries like the Netherlands, Sweden and Switzerland — face a surge of shareholders demanding change, the head of the region’s biggest engineering company says he’s growing increasingly wary of striking the right balance between financial results and building for the future.
“You need to keep the difference between the shortterm aspect and the long-term aspect very close,” Kaeser said in a Bloomberg TV interview to be aired next month. “The wider it gets, the more activists you get in saying ‘Hey, this is a performance gap and I want this now’.”
Activist investors have moved increasingly into Europe and beyond. Dan Loeb’s hedge fund, Third Point, announced Sunday it had amassed a $3.5 billion (Dh12.86 billion) stake in Vevey, Switzerland-based Nestle SA. Sweden’s Cevian Capital AB counts Siemens rival ABB Ltd. as well as Ericsson AB as its targets, while Dutch paintmaker Akzo Nobel NV endured a bruising battle with hedge fund Elliott Management Corp. over ownership. General Electric Co. has had to contend with the demands of activist investor Trian Fund Management LP, which put pressure on the company to improve performance.
Siemens escaped till now
Siemens, conversely, has so far escaped being a target. Kaeser, a company veteran who joined in 1980 as a business studies graduate, has spent his four years as CEO simplifying the Byzantine structure of the conglomerate that makes goods ranging from power turbines, health scanners, ovens and factory equipment. That’s helped the stock price, which has risen 49 per cent since he took the top job.
The firm Chancellor Angela Merkel once called a “flagship of the German economy” has been under a continuous state of flux over the decades. Once the purveyor of choice for statecontrolled behemoths like utilities and phone companies, Siemens has scaled back its operations significantly over the years, jettisoning everything from mobile phones to hearing aids to a majority of its lighting business, Osram Licht AG.
In his time at the helm, Kaeser has also spearheaded an effort aimed at bringing the company into the digital age. Siemens has spent billions bolstering its software business, with the acquisition of CD-adapco in 2016 for almost $1 billion, and the $4.5 billion buy of Mentor Graphics Corp. that closed in March. Kaeser is now laying plans to carve out the health-care division called Healthineers.
The CEO has talked about the company adopting more of a holding-like structure that gives autonomy to units, while still being centrally managed.
For Kaeser, who spoke before Third Point unveiled its position in Nestle, the changes at Siemens are important, along with creating an “ownership culture” under which employees buy shares and get a stake in the company’s future.
New forms of short-term investing “are being invented in America, then they come over” to Europe, he said in the wideranging interview, adding that taxes on capital gains are one way to discourage the practice.