Siemens fights allegations with $3.5bn purchase

Siemens, Europe's largest engineering group, is to strengthen its core automation division by paying $3.5 billion (€2.7 billion) to buy private equity-owned UGS as it seeks to show it has not been paralysed by bribery allegations.

Details of the plan emerged as the German conglomerate suffered a fresh blow yesterday when the European Commission ordered it to pay a record €397 million fine for its "leadership role" in a price-fixing cartel.

Last night the company was also considering whether to float its VDO car-parts division, which has annual sales of about €10 billion, according to sources close to the situation. The moves highlight the determination of Klaus Kleinfeld, Siemens' chief executive, to push ahead with strengthening and restructuring despite being enmeshed in corruption allegations.

Siemens's management will also hope the news will deflect criticism over the corruption scandal and underperforming businesses at the group's annual meeting today.

Allegations that managers used bribes to win contracts and that executives knew about it have tarnished the group's image and yesterday's fine brings fresh embarrassment. All current and former management board members accused have rejected the allegations against them.

Announcing the fines yesterday, the commission said it had punished Siemens more severely because of its size, clout and elevated role in a cartel that carved up the market for gas-insulated switch gear.

The 11 groups involved in the cartel were fined a total €751 million, the largest fine for a single cartel.

In addition to Siemens, the groups fined included MitsubishiElectric, which was told to pay €119 million; Toshiba €91 million; and Hitachi €52 million. Alstom was fined €65 million but may escape part of the penalty because it sold the subsidiary involved in the price-fixing to Areva in 2004. The French nuclear power group was jointly liable for €54 million of Alstom's fine, the commission said.

ABB, the Swedish/Swiss group, was part of the cartel but escaped punishment because it blew the whistle.

Siemens said it would appeal against the decision. The Munich-based group said in a statement that price-fixing only took place in a "few projects" and only between October 2002 and April 2004.