Schneider to acquire Invensys for $5.2 bn

French energy management company Schneider Electric, today said that it would acquire British industrial software group Invensys Plc, for £3.4 billion ($5.2 billion), in order to make bigger inroads into the attractive industry automation sector.

Based in the western suburbs of Paris, Schneider offerred 372 pence in cash and 130 pence in new Schneider shares - a total of 505 pence, representing a 14-per cent premium to Invensys' 11 July closing price on the London Stock Exchange, the day before talks between the two firms were disclosed.

Post closing, Invensys shareholders will own approximately 3 per cent of the enlarged group.

The proposed acquisition will be Schneider's biggest after it purchased American Power Conversion Corp in 2006 for $6.1 billion.

But the deal may not yet be over since it potentially faces rival bids from Emerson Electric Co, General Electric and ABB. (See: GE prepares to counter Schneider's bid for Invensys)

Schneider said it believes that the transaction will generate synergies of around €400 million per annum by 2018 and estimated impact on EBITA is around €65 million per annum by 2018.

In addition, the Schneider board believes that it will be able to achieve cost savings of approximately €140 million per annum by 2016 and generate approximately £400 million in tax savings annually.

Commenting on the transaction, Sir Nigel Rudd, chairman of Invensys, said, ''Following the recent disposal of Invensys Rail, the agreement with the Pension Trustees and the re-organisation of the Group, the Invensys Directors believe that Invensys is strongly positioned to execute on its growth strategy going forward.

''We are delighted to announce the combination of Invensys and Schneider Electric in what is an exciting day for the stakeholders of both companies. The addition of Invensys' businesses will considerably strengthen Schneider Electric's overall offering to its industrial and infrastructure customer base, reinforcing us as a global leader in energy management solutions integrating power and automation, as well as leading software for customer efficiency,'' said Jean-Pascal Tricoire, chairman and CEO of Schneider.

''The transaction will allow Schneider Electric to benefit from increased scale and realise substantial synergy benefits from the combination. We believe our offer is compelling to Invensys Shareholders who will realise significant value for their holdings while having the opportunity to participate in the future strengths of the combined business,'' he added.

Analysts had earlier said that Invensys could be a potential takeover target after it recently sold its rail automation unit to Siemens for £1.74 billion.

Invensys, whose business includes industrial automation systems, was in talks last year with potential suitors, including Siemens and General Electric to sell itself either completely or partially.

Last July, the company, run by chief executive Wayne Edmunds, said that it has ended takeover talks with US industrial giant Emerson Electric and other potential suitors, without an offer being made. (See: British engineering firm Invensys ends talks with Emerson Electric)

The company did not reveal why Emerson and others had backed off from making an offer, but potential suitors may have been deterred by Invensys's then £426-million pension deficit.

Invensys, an FTSE 250 Index company, was formed through the 1999 merger between two British engineering giants BTR plc and Siebe plc. It makes software and control systems for industrial plants, nuclear power stations and home appliances.

Of its 16,900 employees, only 1,100 people are employed in the UK, while the rest are spread in over 180 countries, where it generates more than 95 per cent of its turnover.

The company has a market cap of $3.3 billion and generated a net profit of $188 million in 2012 on revenues of $2.7 billion.

Schneider Electric, which made acquisitions worth $3.8 billion in 2011 and 2012, including Indian power-storage systems maker APW President Systems, was founded in 1836 by two brothers, Eugène and Adolphe Schneider, who began by manufacturing electric motors and locomotives.

Today, it is a global leader in power and control solutions mainly through the over 18 strategic acquisitions it has made since the past 135 years.

The company is a specialist in integrated solutions across multiple market segments that include energy and infrastructure, industrial processes, building automation, and data centres/networks, as well as a broad presence in residential applications.

Schneider, which has a market cap of $31 billion, reported sales of $31.1 billion in 2012.