French industrial group Schneider Electric SE has agreed to take control of British engineering software provider Aveva Group PLC, expanding the global reach of the technology offerings of the two operators.
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Under the deal, announced in a joint statement Tuesday, Schneider will fold its software assets into Aveva's operations and pay the U.K. company more than GBP550 million ($710.4 million) in exchange for a 60% stake in the combined entity, in a so-called reverse takeover. Aveva would also distribute GBP100 million to shareholders following the deal's completion.
Aveva, with a current market value of about GBP1.2 billion, would maintain its listing on the London Stock Exchange and remain headquartered in Cambridge, U.K.
Schneider has already targeted U.K. software companies in the past to bolster its industrial software business. In 2013, it agreed to acquire Invensys PLC for GBP3.31 billion to better compete against rivals such as Siemens AG, Mitsubishi Electric Corp. and Rockwell Automation Inc. The combination would offer it opportunities to cut costs and access new customers.
"Through increased scale and complementary footprint the transaction will generate synergies that will benefit customers and shareholders alike," said Jean-Pascal Tricoire, Schneider's chief executive.
Spun out of Cambridge University in 1967, Aveva provides engineering software to owners, operators and engineering contractors that operate in the power, oil-and-gas, marine and paper and pulp sectors, among others. It employs more than 1,700 people across 30 countries. Its other main markets include power, petrochemical and chemicals.
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The deal comes at a time when Aveva is trying to reduce it reliance on the slowing oil-and-gas and marine markets. For the year ended March 31, Aveva boosted revenue by 7% to GBP215.8 million from the prior year, benefiting in part from currency moves. Discounting that, revenue was down 3.8%.
Schneider's software is used to help manage manufacturing processes, design tools and train plant crews. It services an array of industries ranging from transportation to its largest market of food and beverages and pharmaceuticals, which generated about 16% of the company's annual software revenue.
The combination will also give Aveva greater access to the U.S. market, where Schneider's software business generates almost half of its annual sales. Aveva generates the bulk of its revenue in Europe, the Middle East and Asia.
"Aveva will significantly expand its scale and product portfolio, increase its capabilities in the owner operator market, diversify its end user markets and increase its geographic exposure to the North American market," said Aveva Chairman Philip Aiken.
The planned transaction is similar to the structure of the companies' previous attempt to merge their industrial software businesses in July 2015. Then, Schneider had agreed to combine its software assets with those of Aveva and pay GBP550 million in exchange for a 53.5% stake in the enlarged group. However, the deal collapsed after the two sides couldn't agree on final terms.
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(END) Dow Jones Newswires
September 05, 2017 03:21 ET (07:21 GMT)