Schneider Electric Pays Big to Acquire Invensys at a 27% Premium

July 30, 2013 by Jeff Shepard

Schneider Electric S.A. announced today that it has reached an agreement on the terms of a recommended offer by Schneider Electric to acquire the entire issued and to be issued share capital of Invensys plc . Under the terms of the Offer, Invensys shareholders will be entitled to receive, for each Invensys share: 372 pence in cash, and 0.025955 new Schneider Electric shares. Based on the closing price per Schneider Electric share and £/€ exchange rate on 11 July 2013, the consideration for the Offer represents a value of 502 pence per Invensys Share, or £3.4 billion ($5.2 billion) in aggregate: It represents a premium of 14% to the closing price of 440 pence per Invensys share on 11 July 2013 (being the last business day prior to announcement of discussions). And it represents a premium of 27% to Invensys shareholders over the last 3-month VWAP of 396 pence per Invensys share prior to announcement of discussions.

Jean-Pascal Tricoire, Chairman and CEO of Schneider Electric, commented: “We are delighted to announce the combination of Invensys and Schneider Electric in what is an exciting day for the stakeholders of both companies. The addition of Invensys' businesses will considerably strengthen Schneider Electric's overall offering to its industrial and infrastructure customer base, reinforcing us as a global leader in energy management solutions integrating power and automation, as well as leading software for customer efficiency.

“The transaction will allow Schneider Electric to benefit from increased scale and realise substantial synergy benefits from the combination. We believe our offer is compelling to Invensys shareholders who will realise significant value for their holdings while having the opportunity to participate in the future strengths of the combined business. We warmly welcome Invensys' team and believe that the combined business will provide new and larger growth opportunities for employees and customers as well as offering Schneider Electric's shareholders significant future value creation,” Tricoire concluded.

This acquisition is expected to reinforce Schneider Electric’s coverage of and access to key electro-intensive segments with integrated and complete solutions. Invensys is a world leader in the provision of automation solutions to electro-intensive industries, deriving 61% of its revenue from these end-markets in FY2013. As at the end of FY2013, Invensys’ customer portfolio included: 23 of the top 25 oil and gas companies; 48 of the top 50 chemicals companies; 18 of the top 20 pharmaceuticals companies; All of the top 10 mining companies; and 21 of the top 25 food and beverage companies.

The acquisition of Invensys is also expected to strengthen Schneider Electric’s position in these end markets and will complement its existing PlantStruxure PES offering, its software application offering, and its significant power distribution presence with those customers. Invensys’ presence in segments driven by process automation is therefore very complementary to Schneider Electric’s Industry business’ historical presence in segments driven by discrete and hybrid automation. The enlarged group expects to leverage its coverage of all key industry segments and drive pull through across their customer bases. Schneider Electric’s low and medium voltage and critical power solutions will be combined with Invensys’ operation and asset management systems and will allow the enlarged group to significantly strengthen its new business proposition.

Schneider Electric plans to combine Invensys with its existing Industry division. The Industry division will benefit from a broadened geographical footprint, a balanced offering of Products and Solutions (including increased presence in software and services) and a more balanced exposure to short and long-cycle industries. A significant proportion of Invensys’ business is derived from systems and services offered to clients. The integration of Invensys within Schneider Electric’s Industry business will increase the share of revenues derived from solutions and services from 24% to 40%, increasing the share of recurring and high added-value revenues for the business.

The transaction will also balance geographically Schneider Electric’s Industry division, with an increased exposure to North America. The acquisition will balance the cyclical profile of the Industry business, increasing significantly the share of revenues generated in long-cycle activities.

“Following the recent disposal of Invensys Rail, the agreement with the Pension Trustees and the reorganization of the Group, the Invensys Directors believe that Invensys is strongly positioned to execute on its growth strategy going forward. However, the Invensys Directors believe that the offer from Schneider Electric represents an attractive value for Invensys Shareholders and reflects the future growth prospects of the business and a significant proportion of the benefits which are expected to accrue from the strong strategic fit between Invensys and Schneider Electric. Combined with the disposal of Invensys Rail and return of £625 million to shareholders, this represents a very attractive result for Invensys Shareholders. Furthermore, the members of the Invensys Pension Scheme will benefit from the ongoing support of a significantly larger, leading, global automation business,” according to Sir Nigel Rudd, Chairman of Invensys.