AVEVA did it: reaches deal to acquire OSIsoft for $5 billion

Remember how AVEVA said it was in talks to acquire OSISoft? Appears they were successful: AVEVA just announced that it has reached agreement on the terms of an acquisition of OSIsoft at an enterprise value of $5.0 billion. Lots more detail to come but here’s what we know now:

• AVEVA intends to finance the acquisition by issuing $0.6 billion in Ordinary Shares and using $4.4 billion in cash. That cash will come from a rights issue of $3.5 billion and $0.9 billion of cash on balance sheet and new debt facilities. I am not sure what a rights issue is and how that creates cash separately from a share issue — will update once I know more about this.

• OSI will be integrated as a business unit within the combined group (so not with Schneider Electric). AVEVA intends to establish retention agreements with key OSIsoft management and its founder, Dr. J. Patrick Kennedy, will be appointed to the new (non-Board) role of Chairman Emeritus.

• Because you’ll ask, AVEVA shared this about OSIsoft’s revenue: revenue grew at a compound annual growth rate of around 10% from 2009-2019, and “this strong growth continued this year as the imperative for digital transformation has continued through the COVID-19 crisis, with year over year revenue growth of 10.0% in the six months ended 30 June 2020. In the twelve months ended 30 June 2020, OSIsoft had revenue of $488.5 million and Adjusted EBIT of $152.2 million”. For those keeping score, this represents a 10x-ish revenue multiple

• AVEVA believes that the acquisition will be accretive to earnings in AVEVA’s fiscal 2022, ending 31 March 2022.

So why do this? AVEVA says OSIsoft’s PI System “will be a key enabler of a number of AVEVA solutions, in particular enhancing the Digital Twin, HMI/SCADA, Manufacturing Execution System and Asset Performance, with more inputs and connectivity to feed AI-infused and cloud-based solutions”. Their combined solution set will “optimise engineering, operations and performance, with unprecedented efficiency and value as a result of the integration of both businesses”. Finally, of course, there’s AVEVA’s global scale and Schneider Electic connections: “AVEVA will be able to accelerate the market adoption and expansion of OSIsoft Cloud Services (OCS) and other cloud-based offerings, which recently entered into an early adopter program and provide OSIsoft’s industry leading data management capability in a native cloud environment”.

The acquisition requires AVEVA’s shareholder approval, and the initial material includes that Schneider Electric which owns about 60% of shares will vote to approve the deal. In addition, antitrust and other regulatory approvals must be sought. In all, AVEVA expects the deal to close near the end of 2020.

As I said when this first hit the news, this makes a lot of sense for AVEVA and Schneider Electric. They gain control over PI System, go more deeply into new verticals and further reducing reliance on oil and gas customers, and, of course, bring PIto a much broader target market. I had thought the deal would go for something like $4 billion — OSI Soft is clearly a better negotiator than I had thought.

More after the press conference later today.