France's Schneider to roll assets into Aveva in exchange for 60% of combined company
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 6, 2017).
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Schneider Electric SE of France has agreed to take control of British engineering software provider Aveva Group PLC, the latest move by an industrial giant toward writing the software that will run the factories and machines of the future.
Under the deal, announced jointly on Tuesday, Schneider will fold its software assets into Aveva's operations and pay the U.K. company more than GBP550 million ($710 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.
Fearing disruption from tech startups and Silicon Valley giants, the companies are combining their software operations to add heft as manufacturing adopts more automation. Other companies, including General Electric Co. and Robert Bosch GmbH, have been working on digitizing their manufacturing processes, and developing software platforms and automation tools to sell to other industrial players.
Schneider 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 latest combination offers 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.
The planned transaction is similar to the structure of an attempt by the companies 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.
Spun out of the University of Cambridge 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.
The deal comes at a time 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 industries ranging from transportation to its largest market of food and beverages and pharmaceuticals, which generates about 16% of the company's annual software revenue.
The combination will 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.
Aveva would maintain its listing on the London Stock Exchange and remain headquartered in Cambridge, U.K.
Aveva's lead adviser on the deal is Lazard. Numis is also advising the British company. Morgan Stanley is advising Schneider.
Write to Ben Dummett at firstname.lastname@example.org and Nick Kostov at Nick.Kostov@wsj.com
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September 06, 2017 02:47 ET (06:47 GMT)