Aveva, the British engineering software company spun out of Cambridge University in the 1960s, has announced a deal with France's Schneider Electric that effectively amounts to a £1.3bn reverse takeover of the UK group, which had been viewed as a possible acquisition target after its full year revenue and profits fell by double digits last year.
Aveva on Monday announced it had reached a deal with Schneider Electric to acquire the French company's industrial software unit - Schneider Software - in a complex arrangement that means Schneider will take a majority stake in the UK group.
Under the terms of the deal, Aveva will buy Schneider Electrics's Schneider Software division on a "debt-free cash-free basis".
It will then receive from Schneider Electric upon completion of the deal £550m in exchange for new Aveva shares to be issued to Schneider Electric. Crucially this will mean that Schneider Electric, which is considered a bellwether of European industry, will own 53.5 per cent of the enlarged Aveva Group.
The two companies said that, based on Aveva's current share price - its shares closed at 1,772p on Friday - the c. 74 million Aveva shares to be issued to Schneider Electric as part of the deal have a current market value of around £1.3 billion.
In a statement to the London stock exchange on Monday, Aveva said that given the relative sizes of both companies, the transaction will be classified as a reverse takeover.
In 2013, Schneider Electric bought UK engineering group Invensys for £3.4bn. The industrial software assets that will be transferred to the enlarged Aveva group under the deal will include the former Invensys assets.
Aveva and Schneider Electric said there is a "clear and compelling industrial logic and strategic rationale" for the deal, saying the combination of Aveva and Schneider Software will "create a global leader in industrial software, with scale and relevance in key-markets". Combined revenues and adjusted Ebitda are estimated at around £534m and £130m, respectively.
Richard Longdon, chief executive of Aveva, said:
The transaction will be transformational to Aveva, creating a global leader in industrial software, which will be able to better compete on a global scale. Through the acquisition of Schneider Software, Aveva will significantly expand its scale and product portfolio, diversify its end user markets and increase its geographic exposure to the US market, in line with our strategic goals.
