Schneider eyeing market leadership again at Aveva deal

Bloomberg

After two failed attempts in as many years, Schneider Electric SE is betting a deal to combine its industrial software business with the UK’s Aveva Group Plc will create a market leader in programs to design and operate power plants and factories.
Schneider and Aveva unveiled on Tuesday an agreement by which the French company will receive a 60 percent stake in Cambridge, England-based Aveva, valued at about $2.2 billion, in exchange for its software unit, according to a statement. Schneider also will pay 550 million pounds in cash, to be distributed to shareholders of Aveva, who will also get another 100 million pounds from Aveva’s balance sheet, for a total of about 1,014 pence a share.
The combined company will have more heft to compete as industrial giants such as Siemens AG and General Electric Co. spend billions to expand into software as factories become more connected. An initial agreement, in 2015, fell apart after about six months amid concerns about the size of integration costs and complexity of untangling Schneider’s business. A second overture by Schneider ended in June 2016, just two days after talks became public.
“Great ideas take some time to materialize,” Schneider Deputy Chief Executive Officer Emmanuel Babeau said. “It took us a bit more than two years. We made sure the environment was right, that our business was ready to combine and that we had an agreement on operations.”
Aveva shares soared 29 percent to 2,468 pence, the highest in almost four years, at 10:54 am in London. Schneider rose 0.3 percent to 69.10 euros in Paris.
The companies are aiming to close the agreement at the end of 2017, he said. The deal is “absolutely happening” this time, Aveva CEO James Kidd said, adding that Schneider has done a lot of work to separate its software business since the original dialogue between the companies began.
Aveva shareholders will vote on the transaction September 29.
“The industrial logic for putting these two businesses together is extremely powerful, the product sets are extremely complementary and really positioned well for digitalisation of industry,” Kidd said.
Completion of the deal “looks more certain” this time around, Investec analysts including Julian Yates wrote.