Schneider ‘Not Currently’ in Tyco Talks After Stock Decline

Schneider Electric SA (SU) said it’s “not currently” in takeover talks with Tyco International Ltd. (TYC) after preliminary discussions between the companies leaked in the media and sent Schneider’s shares down 7 percent.

Schneider held preliminary talks with Tyco after approaching the company earlier this year, said three people with knowledge of the matter, who spoke on condition of anonymity because the talks are private. Schneider hasn’t ruled out pursuing Tyco, said another person.

Buying Tyco would mark Schneider’s biggest-ever takeover and would add ADT, the largest security systems firm, as well as fire-prevention equipment and valves used in water systems. A purchase would be the biggest yet by any European industrial company, and Schneider would seek to sell some assets that don’t fit with its portfolio and growth plans, analysts said.

“Schneider’s statement leaves the door open, and it’s in their interest to calm things down as Tyco has risen a lot,” said Pierre Boucheny, a Paris-based analyst at Kepler Capital Markets. “The market’s message to Schneider is that there’s a funding issue and that they have to come up with a clear divestment plan.”

Tyco fell 32 cents to $52.01 at 4:15 p.m. in New York Stock Exchange composite trading. It had a market value as of yesterday of about $24.8 billion. Schneider fell 15 cents to 112.75 euros in Paris.

Schneider slid 7.2 percent this week after Bloomberg News reported it was weighing a Tyco takeover.

Schneider Statement

Schneider had been studying a takeover with bankers from JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC), said people with knowledge of the matter. Goldman Sachs Group Inc. (GS) has been advising Tyco, the people said.

“In response to market rumors, Schneider Electric announced today that it is not currently in discussion with Tyco International regarding a potential strategic transaction between the two companies,” the Rueil-Malmaison, France-based company said in a statement. “Schneider Electric stated that it would make no further comment regarding this matter.”

Anthime Caprioli, a spokesman for Schneider, declined to comment today. A Tyco spokesman, Paul Fitzhenry, didn’t return telephone messages. He has previously declined to comment on the matter.

Schneider’s offer valued Tyco at about $30 billion, the Wall Street Journal reported yesterday.

Raising Cash?

“The fact that Schneider ‘is not in talks with Tyco’ is not the same as ‘was not in talks with Tyco nor has ever been in talks with Tyco,” Ben Uglow, an analyst at Morgan Stanley, said in a note to clients. “We suspect that the French company may well have been in early stage negotiations.”

Schneider might be able to raise about $5 billion selling Tyco businesses such as the fire-protection unit, Boucheny said. The acquisition would help reinforce Schneider’s building automation and security systems, the company’s weakest businesses, and would let it benefit from emerging market growth, he said.

Schneider, which beat General Electric Co. (GE) to a French power-transmission business last year, has sought to expand in factory automation and building controls, where it trails companies including Siemens AG (SIE) of Germany and Honeywell International Inc. (HON)

Tyco split into three publicly traded entities in 2007, including the former parent company, which Chief Executive Officer Edward Breen runs from West Windsor, New Jersey, though the headquarters has since moved to Switzerland. Tyco posted sales of $17 billion for the fiscal year ended in September. The company reports second-quarter results on April 28.

To contact the reporters on this story: Zachary Mider in New York at zmider1@bloomberg.net; Jacqueline Simmons in Paris at jackiem@bloomberg.net Francois De Beaupuy in Paris at fdebeaupuy@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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