Yup, it’s a go: Schneider + AVEVA fast-tracked to close this year

Sep 5, 2017 | Hot Topics

Yesterday’s news reports were correct: AVEVA today announced that it is combining with Schneider Electric’s software assets to create a much larger company, one that would have had total revenue of £658 million in the year ended 31 March 2017. The rationale remains the same as on the other two attempts at a matchup: more focus on asset management than AVEVA could do alone; more design and construction that SimSci and the other Schneider software brands could reach. Together, a stronger offering for the oil and gas, power, marine chemicals, food and beverage, pharmaceuticals, mining, water and wastewater end-industries.

On a call for investors, AVEVA’s Chairman Philip Aiken also added this: the new entity, for purposes of the deal itself and, I really really hope not the long run, called “the Enlarged AVEVA Group” will be able to leverage Schneider’s multiple go-to-market channels and established relationships with asset owners and operators. That last has been a main objective for all AEC industry software vendors — lots of sales to engineering companies, not so many to the actual asset operators. Pairing with Schneider will give AVEVA at least and entrée, and at best a very strong concept design – detail design – procurement – construction – handover – operations proposition.

Mr. Aiken said that Schneider has done a lot of work to separate the software parts of the business from the rest, presumably to head off questions about why this deal should go ahead, when the prior attempts failed. Schneider also acquired Telvent since the 2015 go-round; that’ll be included in this deal. In total, Schneider’s software group had revenue of $575 million for the year ended 31 March 2017, flat cc.

He then laid out the deal itself:

  • Schneider Electric will own 60% of the Enlarged AVEVA Group, AVEVA shareholders will own 40%
  • In exchange for giving up their share, AVEVA shareholders will receive £550 million in cash (roughly 858 pence per share) from Schneider
  • They’ll also get a £100 million payout from AVEVA’s excess cash (another156 pence per share)
  • The deal is to be voted on 29 September 2017 and is expected to close by year-end
  • The new company will continue to be listed in the UK
  • A new CEO will be named from outside both companies; AVEVA’s current CEO, James Kidd, will become Deputy CEO and CFO
  • “A number of key executives” from both Schneider and AVEVA have said that they will stay with the new company — critical, to ensure continuity

Schneider CEO Jean-Pascal Tricoire gave his perspective, too: He’s excited that this deal is finally happening; “the time spent learning about each company makes this deal better  than when we started”, “we recognize that running a global software companies requires different but complementary skill sets”, “Schneider Electric can bring a lot to the new AVEVA and will be an important partner to the new AVEVA, just as the new AVEVA will be a very important partner to the digitization of Schneider Electric.” He said that he is committed to the deal, to the partnership after the deal closes as a strategic investor, and to a strong and independent leadership at the new AVEVA.

AVEVA CEO James Kidd sounded relieved that the deal was finally done and excited about the opportunity ahead. He said that the Schneider software business is mostly adjacent in terms of functionality but does open doors into owners and operators — and sells mainly via an indirect channel, which he sees AVEVA taking advantage of — and as a way of addressing the North American market.

Mr. Kidd also laid out the theme of the new entity: realizing AVEVA’s goal of the digital asset across the process industries. Combining AVEVA’s design engineering solutions with Schneider’s process simulation, optimization and manufacturing operations management solutions should both up the value of the digital asset and ensure its viability during the operating life of a plant.

Much more about the deal is here, at AVEVA’s investor site. There’s a 50-page prospectus which I have not waded through yet; i will over the next few days and update with anything interesting or unusual. Be aware: the link above will require you to agree to a disclaimer related to buying and selling financial instruments.

I’ve always liked this combination. It’s CAPEX plus OPEX, oil and gas upstream with mid- and down-stream, North American plus rest-of-world, indirect and direct channels … The two portfolios complement one another with some overlap, but nothing that could tank the value of the whole thing. The executives on the investor call seemed very committed to making this deal happen — but so did the ones on the last 2 deal calls. I can’t help but be skeptical about it, but I really, really hope this one closes. And if it doesn’t, for some reason, both companies need to move on, stop flirting with one another and put us all out of our “will they/won’t they” misery. AVEVA does perfectly fine on its own, as does Schneider’s software business; they don’t have to pair up to succeed but the combination will definitely have a larger presence, offering, R&D and M&A investment potential. I do hope this one sticks.


Update: Schneider Electric also held an investor call. You can find that here. I’ll listen to it later, too.

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