Bloomberg News

Schneider Bids for Telvent in Purchase Valued at $2 Billion

June 01, 2011

(Updates with CEO, CFO and analyst comments starting in fourth paragraph.)

June 1 (Bloomberg) -- Schneider Electric SA, the world’s biggest maker of low- and medium-voltage equipment, agreed to buy Spain’s Telvent GIT SA for about 1.4 billion euros ($2 billion) to double its software development capacity.

Shareholders of Madrid-based Telvent will receive $40 a share under the terms of the offer, the French company, based near Paris, said in a statement today. The offer is 16 percent higher than Telvent’s closing price yesterday on the Nasdaq exchange. Abengoa SA has agreed to tender its 40 percent stake.

Telvent extends Schneider’s move into software and real- time monitors to help manage power grids and other infrastructure efficiently, joining peers like ABB Ltd. After holding preliminary talks with Tyco International Ltd., Schneider Chief Executive Officer Jean-Pascal Tricoire has said in recent weeks he prefers small- and mid-sized targets.

“Telvent reinforces Schneider Electric’s positions in three key infrastructure markets: smart grid, efficient infrastructures, and smart cities,” Tricoire said on a conference call with analysts today. “They are specialized in the operation management of the applications we are dealing with.”

ABB’s $1 billion acquisition of Ventyx Inc. last year marked its expansion in industrial software as the Swiss company seeks out higher-margin markets. It followed that deal with a May 9 agreement to acquire private equity-owned Mincom to add clients in the energy and mining industries.

Spending Cash

For Schneider, the planned Telvent takeover is the second deal in three days. On May 30, it announced plans to buy 74 percent of Luminous Power Technologies Pvt. Ltd, an Indian maker of inverters and power-storage systems, for about 215 million euros.

“In the past two days, we announced two acquisitions that are really just the strict execution of the strategy that we explained in November,” the Schneider CEO said. “A very strong push in the direction of new economies,” and “a very strong move to technologies for solutions.”

Telvent had sales of 753 million euros in 2010, and adjusted earnings before interest, taxes, depreciation and amortization of 115 million euros, according to Schneider. The French company predicted 50 million euros to 60 million euros of “synergies” in terms of earnings before interest, taxes and amortization by 2016. It said the purchase will add to earnings per share in the first year, excluding implementation costs.

Schneider shares rose as much as 1.2 percent in Paris today, and were unchanged at 114.60 euros at 12:03 p.m.

‘High’ Multiples

“The takeover bid of Telvent is perfectly in keeping with the group’s strategy aimed at expanding its solutions activities, especially in the field of smart grids,” said Ludovic Debailleux, an analyst with Natixis in Paris, in a note to investors. “The multiples involved are high, however, in particular with a 2011 Ebitda multiple of 12.”

The median Ebitda multiple in 19 deals announced for computer-services companies in the past 12 months was 9.04, according to data compiled by Bloomberg.

Schneider will finance the Telvent purchase through debt “with a kind of medium term financing, five years,” Chief Financial Officer Emmanuel Babeau said in the conference call. “Today, the cost of such financing for Schneider would be around 3 percent.”

The transaction includes the acquisition of Telvent’s 5.50 percent senior subordinated convertible notes, Schneider said.

The tender offer is set to start by mid-June and to close in the third quarter, Schneider said. The plan has been approved by the board of Telvent. The transactions need approval from European and U.S. competition authorities.

--With assistance by Francois de Beaupuy. Editor: Jim Silver, Robert Valpuesta

To contact the reporters on this story: Frank Connelly in Paris at fconnelly@bloomberg.net; Andrew Noel in London at anoel@bloomberg.net.

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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