Siemens Energy has recently decided that Transformation of Industry, or Omterra, would be better off without Siemens Energy. The company said it would begin separating its Transformation of Industry division and potentially sell it to sponsor capital, with potential buyers including KKR, Bain Capital, and Brookfield, while Siemens Energy wants to retain a meaningful minority stake.

However, there is another possibility worth considering besides financial sponsors, which is to sell control to Mitsubishi Heavy Industries. While Mitsubishi isn't known to be pursuing Omterra, but the two businesses have enough in common to make the potential combination interesting.

Transformation of Industry sells industrial machinery for large plants, such as compressors, steam turbines, and generators, as well as electrical systems, maritime equipment, and hydrogen electrolyzers. These segments increasingly sit outside Siemens Energy's main focus on large-scale power generation and electricity transmission, and management says Omterra competes internally for capital investment against businesses offering higher margins.

On the other hand, Mitsubishi has the opposite problem, as industrial machinery and energy equipment are already at the center of its business. Its compressor business supplies petrochemical plants, refineries, natural-gas infrastructure, and other industrial facilities. Mitsubishi also manufactures the mechanical-drive steam turbines used alongside those compressors and has delivered thousands of compressors and turbines globally. This overlap is what makes Transformation of Industry potentially more valuable to Mitsubishi than to a financial sponsor.

The key to this transaction would be cross-selling and ARR expansion synergies, as around half of Transformation of Industry's revenue now comes from servicing previously installed units, backed by more than 85,000 units installed worldwide. Those machines require maintenance for decades after they are first sold. Siemens Energy itself describes that service revenue as stable and recurring. For Mitsubishi, acquiring Transformation of Industry would therefore mean buying not only factories and engineering technology but a large installed customer base. Combining service networks, selling Mitsubishi products to existing Transformation of Industry customers, and spreading engineering and manufacturing costs across a larger operation could make the same assets worth more under combined ownership.

Hydrogen power is another key area of overlap, as Transformation of Industry makes electrolyzers while Mitsubishi has been investing in hydrogen-related machinery, including compressors designed for hydrogen production, transportation, and storage. Mitsubishi says it has manufactured more than 2,600 compressors and is developing higher-speed equipment for a future hydrogen market. While the industry remains economically uncertain overall, owning equipment on both sides of the hydrogen value chain could become strategically valuable if demand eventually rises in line with today's investments.

Furthermore, a majority sale could allow Siemens to participate in Transformation of Industry's future growth while giving Mitsubishi operational control and reducing the upfront capital required.

However, there are several potential problems with the deal. Primarily, compressors and steam turbines are the segments where the companies overlap the most, which means the strongest industrial argument for a combination could also attract the most regulatory scrutiny. Integrating 17,000 employees across dozens of countries also wouldn't be straightforward.

The key to consider is that Siemens Energy is separating Transformation of Industry because it believes the business needs an owner willing to invest differently from its current parent. While private capital can provide the money, Mitsubishi could provide an industrial platform that Transformation of Industry already appears to fit into.