French company Schneider to acquire APC for $6.1 billion
30 Oct 2006
Mumbai: Schneider Electric SA and American Power Conversion Corporation have entered into an agreement under which the former will acquire the outstanding share of the latter for $31 per share.
The
transaction value is estimated at $6.1 billion.
The combination of APC, the world's biggest supplier of
circuit breaker, and Schneider Electric will create the
largest maker of equipment for both single-phase and three-phase
uninterruptible power supply (UPS) systems as well as
the preeminent provider of integrated systems for IT and
data center applications that protect computers and factories
from power outages.
Schneider, based near Paris, said it would fund the deal
with a €4.5-billion ($5.7 billion) loan and €1.2
billion of new stock.
The acquisition of APC will double Schneider's sales of
electrical-surge protectors and emergency-power systems.
The market for UPS systems is growing at eight per cent
a year with clients like Microsoft, Boeing and AT&T
seek to guard against blackouts. Power outages can cost
chipmakers $4.8 million an hour, the French company said.
APC, based in West Kingston, Rhode Island, is cutting
about seven per cent of its workforce to save as much
as $32 million after second-quarter earnings fell 41 per
cent to $24.71 million.
APC's board has approved the deal and will recommend it
to shareholders.
Demand for the UPS systems has jumped as companies increasingly
rely on digital technology that requires a constant supply
of electricity. APC's products protect computers, data
centres and hospitals against damaging surges and switch
to emergency batteries or shut systems down in the event
of a blackout.
The takeover is Schneider's biggest since the 2001 purchase
of Legrand SA, the world's No. 1 maker of power sockets
and switches and the seventh-largest of a US company by
a French buyer, according to agency reports.
Schneider expects to complete the purchase in the first
quarter. The transaction will be funded through a loan
from BNP Paribas SA, cash reserves, debt and a capital
increase equivalent to about six per cent of the company's
market value, the company said.
The APC acquisition ranks below deals like Alcatel SA's
$13.4 billion
bid for Lucent Technologies and Cap Gemini's $10.5 billion
purchase of Ernst & Young's consultancy business in
2000.
