Schneider Electric agrees $5.2 bn buy of Invensys

Wednesday 31st, July 2013 / 22:45 Written by Oman Observer 

                        

PARIS — France’s Schneider Electric is to buy British engineer Invensys 

for an agreed £3.4 billion ($5.2 billion) to strengthen its high-margin 

industrial automation business and win more custom in the fast-growing

energy sector. Schneider said yesterday it would pay 502 pence a share 

in cash and stock, 14 per cent above Invensys’ closing price the day 

before talks between the two firms were disclosed. That is just below 

an initial proposal of 505 pence a share after other bidders failed to 

emerge, although the cash component is higher, at 372 pence, than 

the original 319 pence.

The deal, Schneider’s biggest since its $6.1 billion purchase of American 

Power Conversion Corp in 2006, will combine Invensys’automation software

 that helps run power stations, oil refineries and chemical plants with 

Schneider’s automation products for the car, aerospace, food and 

beverage industries. It will bolster the French group against larger 

players such as Switzerland’s ABB and Germany’s Siemens and give 

it the opportunity to cross-sell its energy efficiency products to 

Invensys’ high energy-using customers.
“The Invensys deal is a little bit expensive, but if we discount back the 

synergies it looks OK,” said Espirito Santo analyst Rob Virdee.
Schneider, which has been hit by a faltering world economy and a weak 

Europe in particular, forecast the deal would deliver 140 million euros 

of cost savings a year by 2016 and about 400 million euros of additional 

revenues a year by 2018.
Chief Financial Officer Emmanuel Babeau told reporters it would review 

the future of Invensys’ appliance unit, which makes controls for washing 

machines, suggesting it could be sold.
At 1020 GMT, Schneider’s shares were up 4.1 per cent at 60.37 euros, 

while Invensys’ were up 2 per cent at 501 pence.
The British firm has long been touted as a takeover target in an industry 

dominated by larger rivals and some analysts had speculated Schneider’s

interest could prompt rival bids from firms such as Emerson and General 

Electric.
The bid speculation gathered pace after Invensys sold its rail unit in 

November, allowing it to cut its pension deficit.
According to Reuters data, Schneider’s offer values Invensys at 22.8 times 

forecasts for the British firm’s earnings for next year.
Britain’s listed industrial machinery firms are on average trading at a 

multiple of 13.3 times earnings estimates for 2014.
The French firm said it expected the deal to boost cash earnings per 

share by a low to mid single-digit per centage in 2014 and by a high 

single digit-per centage in 2016.
Integration costs would be about 150 million euros over 2014/15, with 

acquisition costs of about 60 million and tax savings around 400 million 

over the first five years, it added. The deal is expected to close in the 

fourth quarter of 2013. Schneider said its first-half earnings before 

interest, tax and amortisation (EBITA) fell 2 per cent to 1.53 billion 

euros, reflecting the economic crisis in Italy and Spain, low business 

confidence in France and lower spending by utilities in Germany. 

But it kept its full-year organic revenue and EBITA margin targets, 

as organic revenues outside western Europe returned to growth in 

the second quarter. — Reuters