Invensys PLC ISYS Proposed disposal of Invensys Rail

  Invensys PLC (ISYS) - Proposed disposal of Invensys Rail

RNS Number : 2503S
Invensys PLC
28 November 2012




NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO
ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT
LAWS OF THAT JURISDICTION

London, 28 November 2012

Proposed disposal of Invensys's Rail Division for £1,742 million, agreement
with Trustee of Invensys's UK Pension Scheme, proposed £625 million return of
capital and strategy for the more focused continuing Group

Summary



· Invensys  agrees to  dispose of  Invensys Rail  to Siemens  for  £1,742 
million



· Agreements with Trustee of Invensys's UK Pension Scheme to provide  the 
Company with a long term pension solution and increased financial flexibility:

o Up-front payment of £400 million, and

o Payment of £225 million to a trust



· Proposed return of cash to Shareholders of £625 million  (approximately 
76 pence per share)



· Creates  a  more  focused  industrial  software,  systems  and  control 
equipment business  with  significant exposure  to  higher margin  and  higher 
growth markets, and funds to invest in them



· Significant run-rate cost savings of  £25 million per annum by the  end 
of FY2014 based on a simplified organisational structure



· Completion expected in second  quarter of calendar 2013 conditional  on 
Invensys  shareholder  approval,  UK  Pensions  Regulator  approval,   certain 
anti-trust consents and lending bank approval



In view of its size, the proposed disposal constitutes a Class 1 transaction
for the purposes of the Financial Services Authority's Listing Rules and
therefore requires the approval of Invensys shareholders in order for it to be
implemented. A circular containing further details of the proposed disposal
and containing the notice convening the General Meetingwill be sent to
Invensys's Shareholders as soon as practicable.



Wayne Edmunds, Chief Executive of Invensys, commented:

"Following a strategic  review which highlighted  the likely consolidation  in 
the global rail signalling market and  the limited scope to increase the  size 
of the Invensys Rail business, we have decided to refocus the Group around our
industrial software, systems and control equipment business and,  accordingly, 
to dispose of Invensys Rail.

"Invensys Rail  has made  significant strategic  progress over  the last  five 
years and this is reflected  in the disposal price  of £1.7 billion, which  we 
believe delivers  attractive  value for  our  Shareholders and  also  reflects 
Siemens's ability to maximise the division's potential.

"As well  as  providing  Shareholders  with an  immediate  cash  return,  this 
transaction enables  the Group  to create  a long  term pension  solution  and 
therefore increased  financial flexibility  going forward.  The agreements  we 
have reached with the Trustee of the  Invensys UK Pension Scheme for the  £400 
million contribution and the £225 million  Reservoir Trust will result in  the 
cessation of  the current  deficit reduction  payments of  £40-47 million  per 
annum and we anticipate that no further contributions will be payable into the
Scheme.

"This transaction  creates a  more focused  industrial software,  systems  and 
control equipment  Group with  a  significant exposure  to higher  growth  and 
higher margin segments and the resources to invest in them. It also allows us
to  make  substantial  cost   savings  through  a  simplified   organisational 
structure."





J.P. Morgan  Cazenove  and  Ondra  Partners are  acting  as  Invensys's  joint 
financial advisers in relation to the disposal.



This summary  should  be  read in  conjunction  with  the full  text  of  this 
announcement.



Conference Call

A call for  analysts and investors  to discuss  the disposal will  be held  at 
5.15pm GMT today, 28 November 2012.



Dial-in details (please note that the confirmation code is required).



 UK:                +44 (0) 20 7136 2054
 US:                +1 646 254 3360
 France:            +33 (0) 1 70 48 01 66
 Germany:           +49 (0) 30 3001 90534
 Italy:             +39 064 521 7063
 Spain:             +34 91 453 3445
 Confirmation Code: 7843732



The presentation will also be available via audio webcast both live and for
replay purposes. To access the audio webcast please go to
http://www.invensys.com and follow the Invensys Rail Disposal link.



A recording will be available at this address shortly after the completion of
the call. This announcement and the presentation materials are also available
at http://www.invensys.com



Enquiries:



Invensys plc

Steve Devany

Tel: +44 (0)20 3155 1301



J.P. Morgan Cazenove (Financial Adviser, Sponsor and Corporate Broker)

Edmund Byers

Dwayne Lysaght

Richard Perelman

Tel: +44 (0)20 7742 4000



Ondra Partners (Financial Adviser)

Michael Tory

Tomas Hernanz

Tel: +44 (0)20 7082 8750



FTI Consulting (PR Adviser)

Richard Mountain

Andrew Lorenz

Tel: +44 (0)20 7269 7291





Notes to editors



1. About Invensys



Invensys is a global technology company that works in partnership with a broad
range of industrial  and commercial  customers, rail  operators and  appliance 
manufacturers to design and supply  advanced technologies that optimise  their 
operational performance and profitability. Invensys's market-leading software,
systems and equipment enable  its customers to  monitor, control and  automate 
their  products  and   processes,  thereby   maximising  safety,   efficiency, 
reliability and ease of  use. Active in over  180 countries, Invensys  employs 
over 20,000  people across  three divisions:  Invensys Operations  Management, 
Invensys Rail and Invensys Controls.  Further information is available on  the 
Internet at: http://www.invensys.com.

2. About Siemens



Siemens AG  (Berlin and  Munich) is  a global  powerhouse in  electronics  and 
electrical engineering,  operating  in  the fields  of  industry,  energy  and 
healthcare as well as providing infrastructure solutions, primarily for cities
and  metropolitan  areas.  For   over  165  years,   Siemens  has  stood   for 
technological    excellence,    innovation,    quality,    reliability     and 
internationality. The company is the world's largest provider of environmental
technologies. Around 40 percent of its total revenue stems from green products
and solutions. In fiscal 2012, which ended on September 30, 2012, revenue from
continuing operations was €78.3 billion and income from continuing  operations 
was €5.2 billion.  At the end  of September 2012,  Siemens had around  370,000 
employees worldwide on the basis of continuing operations. Further information
is available on the Internet at: http://www.siemens.com.

3. Cautionary Statement



J.P. Morgan Limited (which conducts its UK investment banking business as J.P.
Morgan Cazenove), which is authorised and regulated by the Financial  Services 
Authority in the United Kingdom, is acting exclusively for Invensys and for no
one else in connection with the matters described in this document and is not,
and will not be, responsible to  anyone other than Invensys for providing  the 
protections afforded  to clients  of J.P.  Morgan Cazenove,  or for  providing 
advice in connection with the matters described in this document.

Ondra LLP (which conducts its business as Ondra Partners), which is authorised
and regulated by the  Financial Services Authority in  the United Kingdom,  is 
acting exclusively for  Invensys and for  no one else  in connection with  the 
matters described in this document and is not, and will not be, responsible to
anyone other than Invensys for  providing the protections afforded to  clients 
of Ondra Partners,  or for  providing advice  in connection  with the  matters 
described in this document.



INFORMATION REGARDING FORWARD-LOOKING STATEMENTS



This  document  includes  statements  that  are,  or  may  be  deemed  to  be, 
"forward-looking  statements".   These  forward-looking   statements  can   be 
identified by  the use  of forward-looking  terminology, including  the  terms 
"believes",  "estimates",  "plans",   "projects",  "anticipates",   "expects", 
"intends", "may", "will",  or "should"  or, in  each case,  their negative  or 
other variations or  comparable terminology,  or by  discussions of  strategy, 
plans, objectives, goals, future  events or intentions. These  forward-looking 
statements include all matters that are not historical facts. They appear in a
number of places throughout this document and include, but are not limited to,
statements regarding  the  Invensys  Group's intentions,  beliefs  or  current 
expectations concerning, among other things,  the Invensys Group's results  of 
operations, financial position, prospects, growth, strategies and the industry
in which it operates. By their nature, forward-looking statements involve risk
and uncertainty  because  they  relate to  future  events  and  circumstances. 
Forward-looking statements are  not guarantees of  future performance and  the 
actual results of the Invensys Group's operations and financial position,  and 
the development of the  markets and the industry  in which the Invensys  Group 
operates, may differ materially from those described in, or suggested by,  the 
forward-looking statements contained  in this document.  In addition, even  if 
the results  of operations,  financial  position and  the development  of  the 
markets and the industry in which  the Invensys Group operates are  consistent 
with the forward-looking statements contained in this document, those  results 
or developments may not be indicative of results or developments in subsequent
periods. A number of  factors could cause results  and developments to  differ 
materially from those expressed or  implied by the forward-looking  statements 
including, without  limitation,  general  economic  and  business  conditions, 
industry trends, competition,  changes in  regulation, currency  fluctuations, 
changes in its business strategy, political and economic uncertainty and other
factors discussed in this announcement.

Forward-looking statements may,  and often do,  differ materially from  actual 
results. Any  forward-looking statements  in this  document speak  only as  of 
their respective dates, reflect Invensys's current view with respect to future
events and are  subject to risks  relating to future  events and other  risks, 
uncertainties and assumptions  relating to Invensys's  operations, results  of 
operations and growth strategy. You  should specifically consider the  factors 
identified in this document which could cause actual results to differ  before 
making any  decision  in  relation  to  the  Rail  Disposal.  Subject  to  the 
requirements of the FSA, the London Stock Exchange, the Listing Rules and  the 
Disclosure and Transparency Rules  (and / or  any regulatory requirements)  or 
applicable law, Invensys  explicitly disclaims any  obligation or  undertaking 
publicly to  release  the  result  of any  revisions  to  any  forward-looking 
statements in this document that may occur due to any change in the  Company's 
expectations or to  reflect events  or circumstances  after the  date of  this 
document.

No statement  in this  document is  intended as  a profit  forecast or  profit 
estimate and no statement in this document should be interpreted to mean  that 
the earnings per share of  the Invensys Group, as  reduced by the disposal  of 
Invensys Rail, or Invensys  Rail for the current  or future financial  periods 
will necessarily  match or  exceed the  historical or  published earnings  per 
share of the Invensys Group or Invensys Rail.



Proposed disposal of Invensys's Rail Division for £1,742 million, agreement
with Trustee of Invensys's UK Pension Scheme, proposed £625 million return of
capital and strategy for the more focused continuing Group

1. Introduction

The Invensys Board has undertaken a strategic review of the Group's businesses
and made the decision  to implement a strategy  aimed at refocusing the  Group 
around its industrial  software, systems and  control equipment business  and, 
accordingly, to dispose  of its  Invensys Rail business.  This disposal  would 
also provide  funds to  address  the Group's  UK  pension position,  enable  a 
capital return  to  Shareholders  and  provide funds  for  investment  in  the 
Retained Group.

Disposal of Invensys Rail

Invensys (the "Company") has entered into an agreement (the "Sale  Agreement") 
with respect to the sale of Invensys Rail to Siemens for a cash and debt  free 
price of £1,742 million (the "Rail Disposal"). The principal terms of the Sale
Agreement are described in more detail in Section 4 of this announcement.

UK Pension Plan Arrangements

Conditional on the  completion of the  Rail Disposal ("Completion"),  Invensys 
has also entered into a number  of agreements (the "Pension Agreements")  with 
the trustee of the  Company's UK Pension Plan  (the "Pension Trustee"),  which 
are intended to  provide significantly  improved security for  the UK  Pension 
Plan and a high  degree of clarity  over future funding  for both the  Pension 
Trustee and the  Company, as  well as significantly  increasing the  financial 
flexibility of  the  Retained  Group. These  agreements,  together  with  the 
consent of  the Pensions  Regulator, are  required to  enable the  Company  to 
proceed with  both the  Rail Disposal  as well  as the  return of  capital  to 
Shareholders (as described below). Under the Pension Agreements:

(a) Westinghouse Brake and Signal Holdings Limited ("Westinghouse"),  one 
of the companies being sold to Siemens (the "Target Companies"), will cease to
be an  employer for  all purposes  in relation  to the  UK Pension  Plan  from 
Completion;

(b) Westinghouse will contribute £400 million  to the UK Pension Plan  no 
later than five business days following Completion (this amount is included in
the cash and debt free price of £1,742 million);

(c) Invensys will immediately following Completion pay an amount equal to
£225 million (less any amounts paid  to the Pension Scheme between signing  of 
the Sale Agreement and Completion) (the "Reservoir Trust Amount") into a trust
(the "Reservoir Trust"), which will provide security in favour of the  Pension 
Trustee to  cover  any  remaining deficit  and  act  as a  buffer  for  future 
contingencies. The  Reservoir  Trust Deed  contains  a mechanism  for  future 
payments to be made from the Reservoir Trust to either the Pension Trustee  or 
the Company dependent  on the funding  position of the  Scheme, commencing  in 
2018; and

(d) the current deficit reduction payments of £40-47 million per annum to
the Scheme agreed to be paid until  2017 will cease on Completion of the  Rail 
Disposal, and it is anticipated that no further contributions will be  payable 
to the Scheme for the foreseeable future (until 2018 at the earliest).

The Reservoir Trust mechanism balances covenant protection for the UK  Pension 
Plan with  flexibility  for  the Company.  Hence,  should  market  conditions 
improve sufficiently such funds could be paid  to the UK Pension Plan as  part 
of an overall pension solution thereby  enabling the Company to better  manage 
its pensions  liabilities  by  removing  any future  need  for  the  Remaining 
Employers to pay  deficit reduction  payments to  the UK  Pension Plan  (again 
depending on market conditions) or the Group could recover the Reservoir Trust
funds over time.

The Pension Agreements are conditional on Completion of the Rail Disposal  and 
are explained in more detail in Section 5 of this announcement.

The Company has applied to the UK Pensions Regulator for clearance in  respect 
of the Rail Disposal, the Pension Agreements and the Return of Capital.

Return of Capital to Shareholders

In addition, subject to Completion of  the Rail Disposal, we intend to  return 
£625million (around  76.7  pence  per share)  to  Invensys  Shareholders  (the 
"Return of Capital"). Information on the Return of Capital will be set  out 
in a separate circular which is  expected to be sent to Invensys  Shareholders 
shortly following Completion of the Rail  Disposal. The Return of Capital  is 
likely to be subject to the further approval of Invensys Shareholders.

The Retained Group

Following Completion  of  the  Rail  Disposal,  Invensys  will  be  a  focused 
industrial and commercial  software, systems and  control equipment  provider, 
delivering value-added solutions to a broad range of industrial and commercial
customers.

In  particular,  the  Board  believes  that  Invensys's  software,  equipment, 
commercial and wholesale businesses  offer attractive margins, good  long-term 
growth prospects and  excellent cash conversion.  These businesses have  good 
market  shares  in  their  respective  niches,  industry  leading  brands  and 
long-term customer relationships. They delivered margins that were above  the 
average for the Invensys Group for both  the year ended 31 March 2012 and  the 
six months to 30 September 2012.

The Retained  Group  is  described  in  more  detail  in  Section  6  of  this 
announcement.

In addition, the more focused and simplified structure of the Group  following 
Completion of the Rail  Disposal will enable a  reorganisation of the  Group's 
management structure leading to cost  savings at an estimated annual  run-rate 
of £25 million. These  savings are described  in more detail  in Section 7  of 
this announcement.

Approvals and Clearances

The Rail Disposal  constitutes a  Class1 transaction for  Invensys under  the 
Listing Rules  and  is  therefore  conditional on  the  approval  of  Invensys 
Shareholders. The Rail  Disposal is  also subject to  approvals from  relevant 
regulatory authorities, the  UK Pensions  Regulator and  the Majority  Lenders 
(being those members  of the syndicate  of lenders holding  two thirds of  the 
total commitments  under the  Group's  existing Facilities  Agreement).  These 
approvals and  hence Completion  are expected  to be  obtained in  the  second 
quarter of calendar year 2013. None of these approvals have been obtained  as 
of the date of this document.

2. Background to and Reasons for the Rail Disposal

The Group is a global technology company primarily focused on the  development 
and application of software,  systems and equipment  that enable customers  to 
optimise their operational performance  and profitability. The Group  supplies 
advanced technologies to a  broad range of end  markets through three  largely 
independent businesses: Invensys Operations Management, Invensys Controls  and 
Invensys Rail.

Over recent  years Invensys  Rail has  made significant  progress executing  a 
strategy of expanding its  business into new higher  growth markets, while  at 
the same time  consolidating its  long standing  position in  the UK,  Iberia, 
Australia and North America. Invensys Rail has delivered significant  contract 
wins in these new markets such that  they currently represent 64 per cent.  of 
Invensys Rail's existing order book,  including the recent successes with  the 
£420million   Makkah‑Madinah    contract   in    Saudi   Arabia    and    the 
£170millionMarmaray Project in Istanbul, Turkey.

However, the Board recognises that there is likely to be consolidation in  the 
global rail signalling sector. The Board also recognises that, in the  longer 
term, the Group will have limited scope  to increase the size of the  Invensys 
Rail business. The  Board believes  that Siemens  is better  placed over  the 
medium to  long term  to maximise  the potential  value of  the Invensys  Rail 
business as part of Siemens's broader rail customer offering. As a result  of 
this, the  Board  believes that  there  are clear  benefits  to being  at  the 
forefront of the consolidation that is likely to occur in the markets in which
Invensys Rail operates.

In light of  these factors, the  Group's strategic review  concluded that  the 
Group should  refocus  the  Invensys Group  around  its  industrial  software, 
systems and control equipment businesses.  The Rail Disposal will also  enable 
the Board to meet its objectives of addressing the Group's pension liabilities
and delivering  value for  Invensys Shareholders  both in  terms of  immediate 
capital returns and enhancing the long-term growth prospects of the Group with
additional resources for investment.

The Board believes that  the proposed price  of £1,742 million  on a cash  and 
debt free  basis  is  an  attractive  value  for  the  business,  which  fully 
recognises Invensys  Rail's leading  positions in  long term  growth  markets, 
returns ahead of  its peers and  well invested technology.  The cash and  debt 
free price of £1,742 million represents a multiple of 15 x OPBIT for the  year 
ended 31 March 2012.

3. Information on Invensys Rail

Invensys Rail is a multi‑national provider of state‑of‑the‑art  software‑based 
signalling, communication  and  control  systems  that  enable  the  safe  and 
efficient operation of trains in mainline and mass transit networks across the
world. Active in over 30 countries,  the Invensys Rail business operates  four 
lines of business: mainline, mass  transit, products and services,  delivering 
local execution  across  a broad  range  of systems  and  solutions  developed 
globally.

Mainline

Systems that automate train operation and protection for all types of mainline
operations including  high  speed  lines,  passenger,  suburban  and  freight. 
Solutions include European  Rail Traffic Management  System (ERTMS),  Westlock 
signalling technology,  Positive Train  Control (PTC),  Westrace Mk2,  control 
centres and traffic management.

Mass Transit

Automation solutions for train operation and protection in some of the world's
leading cities. Invensys  Rail's unique  layered approach  to introducing  new 
systems on top of  legacy systems minimises disruption  to both operators  and 
passengers alike. The Invensys  Rail portfolio includes SIRIUS  Communications 
Based  Train  Control  (CBTC),  Distance‑to‑Go  Radio  (DTG‑R),   Interlocking 
(Westrace Mk2), Automatic  Train Protection (ATP),  Automatic Train  Operation 
(ATO), Automatic Train  Supervision (ATS) and  Integrated Supervisory  Control 
Systems (ISCS).

Products

Extensive range  of trackside  products including  crossings, track  circuits, 
point machines,  relays  and  signals,  and a  range  of  on-board  locomotive 
equipment.

Customer Services

Maintenance services and project and system engineering and design focused  on 
customer specific needs.

A summary of the trading results for  Invensys Rail for the three years  ended 
31March 2012 and the six months ended 30 September 2011 and 2012 (on an  IFRS 
basis) is set out below:

                            Year ended Half year ended 30   Half year ended
                                           September 2011    30September 2012
        Year ended Year ended 31March      (unaudited)        (unaudited)
                                 2012
         31March   31March
           2010       2011
            £m         £m         £m             £m                 £m
Revenue    700        772        775             382                323
OPBIT^1    141        129        116             53                 45

_________________

1 Operating profit before interest and taxation (before exceptional items)

As at 30 September 2012, Invensys Rail had gross assets of £499million.

4. Summary of Terms of the Rail Disposal

A Sale Agreement between the Company, certain subsidiaries of the Company  and 
Siemens has been entered into, pursuant  to which certain subsidiaries of  the 
Company have agreed to sell  (and the Company has  agreed to procure the  sale 
of) shares in  the Target Companies  engaged in the  business of the  Invensys 
Rail division.

The Rail Disposal is conditional  upon: (i) approval of Invensys  Shareholders 
of the ordinary resolution at the General Meeting; (ii) clearance from the  UK 
Pensions Regulator; (iii) the  Pension Agreements taking  effect such that  no 
liability shall attach to any of the Target Companies under Section 75 of  the 
Pensions Act 1995; (iv) clearance from the applicable regulatory  authorities; 
and (v) consent from the Majority Lenders.



5. Pension Agreements

Conditional upon the completion  of the Rail Disposal,  the Group has  entered 
into the Pension Agreements with the  Pension Trustee setting out the  revised 
funding arrangements in  respect of  the UK  Pension Plan.  Under the  Pension 
Agreements, Westinghouse (one of the Target Companies being sold to Siemens as
part of the Rail Disposal) has agreed  to make a contribution of £400  million 
no later than  five business  days following  Completion into  the UK  Pension 
Plan.  The  Company  has  also  agreed  that  it  will  immediately  following 
Completion pay  £225 million  (less any  amounts paid  to the  Scheme  between 
signing of the Sale Agreement and Completion) into the Reservoir Trust.

The UK Pension Plan  has a number of  participating employers within the  Rail 
Group. On Completion of the Rail Disposal one of the participating  employers 
(Westinghouse) will cease to be a participating employer in the plan. On such
cessation a statutory debt would (absent the Pension Agreements) be payable by
Westinghouse to  the Pension  Trustee under  section 75  of the  Pensions  Act 
1995. Under the Pension Agreements, Westinghouse will be discharged from  all 
liability under the UK  Pension Plan, including in  relation to Section 75  of 
the Pensions Act 1995. The Company (as  founder of the UK Pension Plan)  will 
retain all of the liabilities and responsibilities of Westinghouse in relation
to the UK Pension Plan.

The actuarial valuation of the UK Pension Plan, as at 31 March 2011,  revealed 
a Technical Provisions deficit  of £235 million. As  at 30 September 2012  the 
estimated Technical Provisions deficit for  the UK Pension Plan had  increased 
to £570 million mainly as a result of the fall in UK gilt yields arising  from 
the Bank of England's  policy on quantitative easing.  The IAS 19 deficit  of 
the UK Pension Plan, as at 30 September 2012, was £181million.

The proposed payment of  the Reservoir Trust Amount  into the Reservoir  Trust 
will provide the UK Pension Plan  with security against the remaining  deficit 
in the UK Pension Plan after payment of the cash contribution and will provide
a  buffer   for  future   contingencies.  Accordingly,   the  proposed   cash 
contribution and payment  into the  Reservoir Trust will  address the  current 
estimated Technical  Provisions deficit  of £570  million for  the UK  Pension 
Plan. As part of the terms of the Pension Agreements, the Pension Trustee has
agreed to carry out a new actuarial valuation of the UK Pension Plan as at  31 
October 2012 (the "New Valuation"). The New Valuation has not been  completed 
as at the date of this document.  It is anticipated that the Pension  Trustee 
would treat the Reservoir Trust as a  contingent asset of the UK Pension  Plan 
for the purposes of  preparing a Schedule of  Contributions and Recovery  Plan 
under the New Valuation  and in preparing such  documents for the purposes  of 
the next valuation occurring after the New Valuation. Under the terms of  the 
Reservoir Trust Deed any  deficit reduction contributions  in respect of  such 
valuations would be  met from  the Reservoir Trust.  The Company  anticipates 
that there should be no deficit reduction payments due from the Company or the
other Remaining Employers in the UK  Pension Plan until 2018 and any  payments 
that may be required from 2018 will be met by the Reservoir Trust.

The Company remains committed to its  obligations under the UK Pension  Plan. 
The Directors  believe  that the  arrangements  under the  Pension  Agreements 
benefit all relevant stakeholders, with  enhanced security for members of  the 
UK Pension Plan, as well as  providing the Company with greater certainty  and 
financial flexibility to  execute on  its strategic  development. The  Pension 
Agreements provide a high degree of  certainty of funding for both members  of 
the UK Pension Plan and for the Company.

Under the terms of the Rail  Disposal, Siemens will assume responsibility  for 
the Invensys Railways Pension Scheme, a  defined benefit plan which under  IAS 
19 as at 31 March 2012 had a deficit of £39.4 million on gross liabilities  of 
£154.3 million.

6. Profile and Strategy for the Retained Group

6.1 Overview of the Retained Group

Following Completion  of  the  Rail  Disposal,  Invensys  will  be  a  focused 
industrial and commercial  software, systems and  control equipment  provider, 
delivering state-of-the-art,  value  added  solutions  to  a  broad  range  of 
industrial and commercial customers.

In  particular,  the  Board  believes  that  Invensys's  software,  equipment, 
commercial and wholesale businesses  offer attractive margins, good  long-term 
growth prospects and  excellent cash conversion.  These businesses have  good 
market  shares  in  their  respective  niches,  industry  leading  brands  and 
long-term customer relationships. They delivered  margins that were above  the 
average for the Invensys Group for both  the year ended 31 March 2012 and  the 
six months to 30 September 2012.

Invensys Operations Management:

Invensys Operations  Management,  which will  comprise  72 per  cent.  of  the 
Retained Group (based upon revenue for the  year ended 31 March 2012), is  one 
of the world's leading suppliers to the global industrial automation  market. 
Its solutions are used  in more than  200,000 plants and  by more than  40,000 
customers in around  180 countries,  and enable 20  per cent.  of the  world's 
electricity generation, 17 per cent. of the world's crude oil refining and  24 
per cent. of the world's chemical production. Its operations are arranged  in 
three lines of business:

Software (Year ended 31 March 2012 revenue: £231million)



The software  line  of  business is  by  itself  one of  the  world's  largest 
developers and  suppliers of  industrial software  with leading  positions  in 
areas  such  as  real  time   operations  management,  simulation  and   asset 
management. Its  portfolio  includes:  (i)  Wonderware,  the  world's  leading 
HMI/SCADA software which is used to monitor real time operations in factories;
(ii) SimSci  Esscor, the  world's second  largest supplier  of simulation  and 
training software;  (iii)  Avantis, a  leading  provider of  asset  management 
software;  and  (iv)  Skelta,  a  provider  of  business  process   management 
software. Its  SimSci Esscor  offerings have  recently been  expanded by  the 
acquisition of Spiral Software, which specialises in integrated solutions  for 
the oil  refining industry  ranging from  crude assay  management to  refinery 
supply chain optimisation, enabling clients  to maximise the profitability  of 
all aspects of their business.



Systems (Year ended 31 March 2012 revenue: £765million)



The systems line of business is  a global provider of integrated,  distributed 
control systems (DCS) and  safety systems to customers  operating some of  the 
world's largest and most  complex industrial plants,  such as oil  refineries, 
power stations (both fossil fuel  and nuclear) and petrochemical plants.  Its 
Foxboro I/A DCS system has a top  3 global installed base in the industry  and 
its Triconex safety system is recognised as the world's leading safety system.



Equipment (Year ended 31 March 2012 revenue: £276million)



The  equipment  line  of  business  manufactures  a  range  of  high-precision 
measurement and instrumentation products, controllers and recorders under  the 
Foxboro and Eurotherm brands. Its products and services include:

· Process control and temperature  control solutions in life  sciences, 
heat treatment, plastics and glass,  where reducing customers' cost of  energy 
is critical to their business success.

·  Full  range  of  pressure,  flow  and  analytical   instrumentation, 
including level measurement technology.

·  Data   measurement,visualisationand  control   services  for   large 
industrial, commercial  and  retail  energy  users, as  well  as  full  market 
settlement services for managing wholesale electricity trading.

In an industry sector dominated by some large manufacturers, it has carved out
regional and product niches that enable it to compete well on a global scale.

Invensys Controls:

Invensys Controls, which  will comprise  28 per  cent. of  the Retained  Group 
(based upon revenue for the year ended  31 March 2012), is one of the  world's 
leading suppliers  of control  equipment to  a broad  range of  customers  and 
operates within three lines of business.

Commercial (Year ended 31 March 2012 revenue: £85million)



The commercial  line  of business  offers  complete connected  monitoring  and 
control retail solutions in commercial refrigeration, heating, ventilation and
air-conditioning, commercial cooking, level  monitoring, water monitoring  and 
other Invensys energy monitoring products. Its major end markets are original
equipment manufacturers, large  project installers and  system integrators  in 
food preservation, food preparation and comfort sectors.



Wholesale (Year ended 31 March 2012 revenue: £116million)



The wholesale line of business designs, develops, manufactures and distributes
heating controls,  including  room thermostats,  time  controls,  thermostatic 
radiator valves and  under-floor heating  controls, predominantly  for use  in 
residential applications.  It is  also  the supplier  of choice  for  climate 
controls  in  domestic  and  small  commercial  buildings,  optimising  energy 
efficiency and environmental impact.



Appliance (Year ended 31 March 2012 revenue: £291million)



The appliance line of business is  the world's largest supplier of  components 
and systems that control the operation  of appliances in both the  residential 
and commercial sectors.  It has  strong leadership positions  across its  key 
products and supplies all of the world's top seven appliance manufacturers.

6.2 Retained Group Strategy and Investment Priorities

The future  strategy for  the  Retained Group  will  be focused  on  directing 
investment into those lines of business which have technologies, products  and 
market positioning  that provide  opportunities  to achieve  sustainable  high 
margins and revenue growth.

As described below,  some of Invensys's  lines of business  will also seek  to 
supplement organic growth  with selected acquisitions  to broaden and  enhance 
their market positioning and offerings. Invensys continues to review a  range 
of potential opportunities however no  acquisitions are currently in  progress 
or conditional upon the disposal. Acquisitions such as these are expected  to 
have characteristics similar to the  Group's existing industrial software  and 
control equipment businesses, such as strong defensive niches, attractive long
term growth prospects and high returns  on sales and on investment. The  Board 
has a set of  defined strategic and financial  criteria against which it  will 
consider potential acquisitions to ensure they create value for Shareholders.

Invensys Operations Management investment priorities:

Software



Many of Invensys's customers have invested  large amounts of capital in  their 
industrial plants and,  with little greenfield  capacity (particularly in  the 
developed world in North America and  Europe), their focus is upon  maximising 
the efficiency  of their  existing plants.  The Company  will be  accelerating 
levels of  research  and  development  expenditure in  the  software  line  of 
business to capitalise on this  growing demand for next generation  automation 
software and  applications  that  drive productivity,  energy  management  and 
environmental performance.

In addition, the industrial software market  is fragmented with many small  to 
medium sized companies  providing specialist software  products that would  be 
valuable  additions  to  Company's  portfolio.   Invensys  intend  to  be   a 
consolidator in this market, as evidenced by the recent acquisition of  Spiral 
Software which  specialises  in  integrated solutions  for  the  oil  refining 
industry  ranging  from  crude  assay  management  to  refinery  supply  chain 
optimisation, enabling clients to maximise the profitability of all aspects of
their business.



Systems



Invensys has the second largest installed base of DCS in the industry and many
of those systems will need  to be replaced over the  coming decade; it is  the 
Company's intention to invest further in its DCS and safety systems to  ensure 
that it maintains its market position through this process.



Equipment



The  equipment  line  of  business  will  be  making  investments  in  product 
development to improve its  niche market positions  and enhance its  margins. 
The industrial equipment  market includes a  number of small  to medium  sized 
companies providing specialist niche products and Invensys will be looking  to 
acquire those that would be valuable additions to the Company's portfolio.

Invensys Controls investment priorities:

Commercial



The commercial  line  of business  will  be  investing to  grow  by  continued 
geographic expansion and new product  introductions over the medium term.  In 
particular, it will focus on helping customers improve their energy efficiency
with wireless based solutions in areas such as refrigerated transportation.

Wholesale



The wholesale line of business will also be investing in continued  geographic 
expansion and new product introductions over the medium term. In  particular, 
it will be  looking to offer  a full  range of energy  monitoring and  control 
systems, in support of smart home and other smart applications.

Appliance



The appliance line of business has had significant investment in the past four
years to create a lean and efficient manufacturing footprint, predominately in
lower  cost  countries.   Its  markets  are   cyclical  and  have   decreased 
significantly during the investment period. It is now well prepared to  react 
as and when its markets begin to recover.

7. Reorganising the Group's Management Structure

The Rail Disposal is a transformational transaction for the Invensys Group and
will enable the  Retained Group  to reorganise its  management structure  such 
that it  is  expected  it  can achieve  annual  run-rate  cost  reductions  of 
approximately £25million by the end of March 2014. These cost reductions are
contingent on the Rail Disposal and could not be achieved independently.

The cost reductions  will be  primarily driven  by a  reduction in  management 
layers as a  result of  the simplification  of the  reporting structure.  The 
Board expects  that approximately  75  per cent.  of  the reductions  will  be 
associated  with  headcount  reductions,  with  the  remaining  25  per  cent. 
comprising reductions  in third  party  professional fees  and  administrative 
costs, resulting  from  operating  through a  leaner  organisation  structure. 
Approximately 60 per cent. of the run-rate cost reductions should be  secured 
by the end of the first half of the financial year 2013/14, with 100 per cent.
run-rate of such cost  reductions expected to  be achieved by  the end of  the 
financial year 2013/14.

The Board  estimates  that  this restructuring  will  cost  approximately  £30 
million, the vast majority  of which will be  incurred in the first  financial 
year post completion of  the Rail Disposal, in  order to achieve the  run-rate 
cost reductions described above by the end of March 2014.

The financial benefits  described above reflect  both the beneficial  elements 
and the relevant costs associated with this reorganisation.

8. Use of Proceeds and Financial Effects of the Rail Disposal

The cash and  debt free price  for the  Rail Disposal is  £1,742 million.  The 
consideration will be subject to customary adjustments for the amount of cash,
debt and working capital in the Target Companies at Completion.

This amount  includes £400  million to  be paid  by Westinghouse  (one of  the 
Target Companies to be sold to Siemens as part of the Rail Disposal) to the UK
Pension Plan  following Completion.  Under the  Sale Agreement,  Siemens  has 
agreed to  procure  that  by  no  later  than  five  business  days  following 
Completion, Westinghouse will be put in sufficient funds so that when taken in
aggregate with any existing available funds of Westinghouse, it is  sufficient 
and in such a  form as to  allow Westinghouse to discharge  in full such  £400 
million to  be paid  to  the UK  Pension Plan.  Siemens  has also  agreed  to 
indemnify the Company for any breach of this obligation.

The cash and debt free price for  the Rail Disposal also includes £40  million 
in respect of the liabilities relating to the Invensys Railways Pension Scheme
(which sit with  Westinghouse) that  will transfer  to Siemens  with the  Rail 
Disposal. Following Completion, Invensys will have no obligations in relation
to the Invensys Railways Pension Scheme.

The cash proceeds of the Rail Disposal (on the basis of the estimated  working 
capital and  debt)  which will  be  received  by Invensys  on  Completion  are 
estimated to be £1,302million and are intended to be used as follows:

· approximately £625 million (around 76.7 pence per share) to be returned
to Shareholders (further details below);

· the Reservoir Trust  Amount of £225 million  (less any amounts paid  to 
the Scheme between signing of the Sale Agreement and Completion) will be  paid 
into the Reservoir Trust by Invensys;

· approximately £80 million in transaction fees and taxes payable; and

· approximately £372million to  be retained by  the Group to  accelerate 
the strategic  development of  the Retained  Group through  investment in  the 
business and acquisitions.

Details regarding the Return of  Capital will be communicated to  Shareholders 
following Completion of the Rail Disposal  in a separate circular expected  in 
the second quarter of calendar year 2013.  The Return of Capital is likely  to 
be subject to the further approval of Shareholders.

Following Completion of the Rail Disposal and the Pension Agreements, and  the 
proposed Return of Capital, the Group is expected to have net cash  (excluding 
the amounts under  the Reservoir Trust)  of approximately £548million,  based 
upon the pro forma position as at 30 September 2012. 

9. Expected timetable to completion

A circular  containing  further details  on  the Rail  Disposal,  the  Board's 
recommendation, and  the notice  of  the General  Meeting and  the  resolution 
required to  approve  the Rail  Disposal  (the  "Circular") will  be  sent  to 
Invensys's Shareholders  as  soon  as  practicable.  Completion  of  the  Rail 
Disposal is expected to occur during the second quarter of calendar 2013.

10. Advisers

J.P. Morgan  Cazenove  is  acting  as Joint  Financial  Adviser,  Sponsor  and 
Corporate Broker in relation to the Rail Disposal. Ondra Partners is acting as
Joint Financial Adviser,  with Freshfields  Bruckhaus Deringer  LLP acting  as 
Legal Adviser.

Capitalised terms not otherwise defined in this announcement have the meanings
given to them in the Circular.



Enquiries:

Invensys plc

Steve Devany

Tel: +44 (0)20 3155 1301



J.P. Morgan Cazenove (Financial Adviser, Sponsor and Corporate Broker)

Edmund Byers

Dwayne Lysaght

Richard Perelman

Tel: +44 (0)20 7742 4000



Ondra Partners (Financial Adviser)

Michael Tory

Tomas Hernanz

Tel: +44 (0)20 7082 8750



FTI Consulting (PR Adviser)

Richard Mountain

Andrew Lorenz

Tel: +44 (0)20 7269 7291

The release, publication or distribution of this announcement in jurisdictions
other than  the United  Kingdom may  be restricted  by law  and therefore  any 
persons who are subject to the laws of any jurisdiction other than the  United 
Kingdom  should  inform   themselves  about,  and   observe,  any   applicable 
requirements. This  announcement  has  been  prepared  for  the  purposes  of 
complying with the Listing Rules and the information disclosed may not be  the 
same as that  which would have  been disclosed if  this announcement had  been 
prepared in  accordance with  the  laws and  regulations of  any  jurisdiction 
outside of England.

This announcement is not  intended to, and does  not constitute, or form  part 
of, any  offer to  sell or  an invitation  to purchase  or subscribe  for  any 
securities or a  solicitation of any  vote or approval  in any  jurisdiction. 
Invensys shareholders are advised to  read carefully the formal  documentation 
in relation to the Rail Disposal once it has been despatched. Any response to
the proposals should  be made  only on  the basis  of the  information in  the 
formal documentation to follow.



                     This information is provided by RNS
           The company news service from the London Stock Exchange

END


MSCBLBDBLGDBGDI -0- Nov/28/2012 16:32 GMT