Schneider Revives Takeover Talks for Software-Maker Avevaby
Aveva says it has received revised proposal from Schneider
Deal would include a cash payment to Aveva investors
Schneider Electric SE is trying for a second time to buy a majority stake in U.K. software maker Aveva Group Plc, six months after the companies ended talks due to risks that combination costs would be higher than expected.
The board of Aveva is in “preliminary discussions” with the French maker of low- and medium-voltage equipment about a proposal that is similar to one made last year, Cambridge-based Aveva said in a statement on Monday. The deal would be for Schneider to buy a majority stake in the British company through a reverse takeover that would include a “significant cash payment” to Aveva.
The plan revives one unveiled in July to bring together the companies’ industrial software units and create a business that would help design and operate engineering projects from nuclear-power plants to diesel engines. That deal would have seen Aveva receive 550 million pounds ($786 million) and issue new shares to Schneider, giving the French company 53.5 percent of the resulting entity. The talks ended by mutual consent, they said Dec. 15.
“This time I think Schneider will move more aggressively to prepare a better offer for Areva shareholders,” George O’Connor, analyst at Panmure Gordon, said by phone. Given the two companies’ lackluster results since the discussions collapsed, the “industrial logic is stronger, not weaker.”
Schneider shares declined 2.3 percent to 53.99 euros in Paris, while Aveva said its shares are suspended until publication of updated financial information on Schneider’s software business or “confirmation that Aveva is not proceeding with a potential transaction.” The U.K. company’s stock has fallen 14 percent since Dec. 14 when the last deal fell apart.
A slowdown in investment in industries such as oil and gas has hurt sales at the British software supplier, with Chief Executive Officer Richard Longdon deepening cost cuts.
The acquisition of a stake in Aveva would give Schneider a way “to address its oil and gas exposure,” O’Connor said. It would also allow the company to do better in the U.S. market and offer wider and deeper product sets.
Aveva is one of Britain’s digital-age success stories, and along with chip makers CSR Plc and ARM Holdings Plc, they have their origins in Cambridge, home of the university that produced scientists from Charles Darwin to Stephen Hawking. Aveva, which was developed in a government-funded computer center in 1967, introduced the world’s first 3D plant design system in 1976.
As companies like Schneider increasingly take advantage of technology to offer new solutions to industrials, “software will be a key differentiator going forward,” Bloomberg analyst Jawahar Hingorani said by phone.
The deal would be the second acquisition of a British software company by Schneider after the 2.4 billion-pound purchase of Invensys Plc in 2013. The French company acquired American Power Conversion Corp. in 2006 for $6.1 billion.
Under last year’s proposed takeover of Aveva, the resulting new software entity would have had combined sales of about 534 million pounds and earnings before interest, taxes, depreciation and amortization of 130 million pounds. Aveva’s board of directors was to remain in place on completion of the deal, with two additional non-executive directors proposed by Schneider.
"The deal still makes fantastic operational sense," Dwight Burden, a spokesman for Aveva, said Monday by phone.
The Financial Times reported the talks earlier on Monday, saying the deal could be worth more than 500 million pounds and agreed to by the end of June.