The energy technology group Siemens Energy is concretely advancing the spin-off of its industrial division “Transformation of Industry” and has mandated U.S. investment bank Goldman Sachs for the process. According to Bloomberg News, citing people familiar with the matter, the bank is to advise on the sale of a majority stake in the steam turbine business. The supervisory board of the DAX-listed company is meeting on Tuesday to discuss next steps.

Siemens Energy shares rose about 1.5% in pre-market trading in Frankfurt. The plans for a spin-off and potential sale of the division had already supported the stock price in recent weeks.

A circle of prominent bidders is already forming for the potential sale of a majority stake. According to the report, private equity firms such as CVC Capital Partners, EQT, and Bain Capital are considering submitting bids for a majority stake in the business. Brookfield and KKR are also reportedly evaluating offers. The business would likely be valued at more than 10 billion euros in a sale. The deliberations are not yet complete, and there is no certainty that any of the buyout firms will submit a formal offer. All potential parties involved, as well as Siemens Energy itself, declined to comment on the report.

Competition for Capital Resources

The “Transformation of Industry” division generated revenue of approximately 5.7 billion euros last fiscal year with 17,000 employees. The unit manufactures generators, compressors, and microgrids primarily for industrial customers. In the six months through the end of March, revenue stood at 2.7 billion euros, representing 13.5% of the group’s total revenue of approximately 20 billion euros. Siemens Energy describes the division as the world’s largest manufacturer of industrial steam turbines and generators, as well as the second-largest compressor manufacturer.

The division has been led by Anne-Laure de Chammard since 2022. Together with CEO Christian Bruch, she recently presented to the supervisory board why the unit would be better positioned as a standalone company. Both business segments—the industrial division and the energy sector—are highly profitable and growing, Bruch said earlier this month. “But they compete for the same resources in terms of capital.”

The gas turbine and grid equipment businesses are the main drivers of record order intake. They benefit from strong demand for power generation and transmission equipment, as the artificial intelligence boom fuels the construction of data centers. Chammard fears that her unit could come up short in the internal competition for available financial resources.

The investment gap relative to competitors is significant. Rivals such as Baker Hughes invest up to 9% of their revenue annually, while “Transformation of Industry” is at around 4%, according to insiders. To close the gap, roughly 300 million euros in fresh investments would initially be needed. To actually take the various businesses to the next level, investments would need to be expanded cumulatively to roughly 3 billion euros over the coming years.

Possible Paths to Separation

Around two months ago, manager magazin had already reported that Siemens Energy was considering spinning off the division. Citing an internal document, it said the company’s strategists had concluded that a separation would generate higher margins and greater shareholder value in the long term. At the time, a potential sale of around 60% of the division’s shares was mentioned as a first step, with a spin-off or an IPO considered as possible paths. Siemens Energy would retain the remaining 40%.

Whether the divestment of parts or the entire division succeeds will likely depend not least on the labor representatives and union members on the supervisory board. They have so far opposed a potential sale and rejected corresponding resolutions. A breakup at Siemens Energy must not become a permanent state of affairs.

Investors have also long been pressuring Siemens Energy to sell its struggling wind power division Siemens Gamesa. The business recently posted its first quarterly profit in nearly four years, and management expects it to reach breakeven this year.