Schneider Electric SA (SU), the French electrical gear maker, agreed to buy the U.K.’s Invensys Plc (ISYS) for 3.4 billion pounds ($5.2 billion) to add software and control systems used by chemicals makers, oil refineries, and mining companies.
Schneider expects about 400 million euros ($530 million) in annual revenue synergies by 2018, which would boost earnings by 65 million euros that year, the company, based in Rueil-Malmaison near Paris, said in a statement today. The bid price is 14 percent higher than Invensys’s closing price of 440 pence on July 11.
The purchase marks Schneider’s biggest takeover since the $6.1 billion purchase of American Power Conversion Corp. in 2006 as the French company looks to fend off competition from Emerson Electric Co. (EMR:US) and ABB Ltd. (ABBN) of Switzerland. Invensys will supplement its factory automation offering as Schneider faces a slump in European construction.
“The addition of Invensys’ businesses will considerably strengthen Schneider Electric’s overall offering to its industrial and infrastructure customer base,” Chief Executive Officer Jean-Pascal Tricoire said in the statement.
Schneider is offering to pay 502 pence a share, comprising 372 pence in cash and 0.025955 in new Schneider shares per Invensys shares. It sees about 140 million euros in annual cost savings by 2016, and about 80 million euros in annual tax savings over the first five years.
Standard & Poor’s said on July 17 it may cut Schneider’s A-credit rating as the company takes on more debt to fund part of the acquisition. The transaction “would put some pressure” on Schneider’s credit metrics, Moody’s Investors Service said the same day.
Schneider today reported first-half net income fell to 831 million euros ($1.1 billion) from 876 million euros a year earlier. Analysts estimated 837 million euros, on average.
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