Aveva, the British engineering software company, has called off its £1.3bn reverse takeover by France’s Schneider Electric, citing unforeseen costs and risks associated with the proposed merger.
The complex deal would have involved Aveva acquiring Schneider’s industrial software unit — Schneider Software — but the French company would in turn have taken a majority stake in Aveva. The two companies had previously said there was a “clear and compelling industrial logic and strategic rationale” for the tie-up.
But following six months of extensive due diligence, Aveva said on Tuesday the companies had determined that “significant integration challenges were identified that could not be overcome without considerable additional risk and cost”.
Aveva shares dropped 35 per cent in morning trading to £14.75. Schneider shares were basically flat.
Schneider said in a statement: “The two parties have decided to stop their discussions by mutual consent as no agreement could be reached on the terms of transaction.”
Speaking to the Financial Times, Aveva chief executive Richard Longdon added that: “The sad thing is the industrial logic was always good and still is. But they say that time kills deals. Too much time had gone on.”
Neither company will have to pay a break fee as the terms of the transaction were non-binding.
Aveva, a member of the FTSE 250 spun out of Cambridge University in the 1960s, is a supplier of software to the mining, oil and gas, and paper and pulp industries.
There had been growing frustration at Aveva over the slow pace of talks with Schneider, with some blaming the French company’s larger size for a lack of focus on completing the deal.
Mr Longdon said: “To do a deal this complicated does need a huge amount of attention from very senior staff. We are talking about a very small part of the overall Schneider — 2,000 employees [at the industrial software unit] compared to 186,000 [at the overall company].”
Other groups, including Emerson and General Electric, were also reported to be weighing offers for Aveva earlier this year. People close to the situation say potential suitors were waiting for the expected resolution of talks with Schneider Electric in the new year before making a decision on whether to make a counter-offer.
“I wouldn’t be surprised if we get interest today [from other buyers], never mind January,” said Mr Longdon. “The board has a very open mind about that.”
Aveva had previously been wary of a full takeover by Schneider. Under the proposed deal terms, Aveva had inserted clauses such as an insistence that its leadership — Mr Longdon, chairman Philip Aiken, and the company’s board of directors — remained in place, as well as “standstill” periods over which Schneider could not increase its shareholding in the UK company.
George O’Connor, analyst at brokerage Panmure Gordon, said the market had grown wary of the deal as it would have required “deep operational change” at Aveva amidst a “poor operational backdrop”.
In November, the company said it had swung into a £0.8m loss in the first half of 2015, as the company was squeezed by the falling price of oil.
“We… do not see another bid in the short term, and applaud the clear thinking at Aveva and from its shareholders,” said Mr O’Connor.