France's Schneider Electric will combine its software operations with British engineering IT firm Aveva in a ‘reverse takeover’.
The deal will see Aveva acquire Schneider's software division on a "debt-free cash-free" basis and Schneider will then pay Aveva £550m for new Aveva shares, which will result in it owning 53.5 per cent of the enlarged company – worth £1.3bn at the current market value.
Cambridge-based Aveva – which provides design software for the industrial plant, power and shipping industries – has been the subject of months of takeover speculation and the deal will see its shareholders receive about £10 a share in cash in return for the French company taking control, according to brokers.
The tie-up reduces the Cambridge University spin-off's exposure to oil and gas markets, the source of about 45 per cent of its revenue. Lower oil prices have cut demand for rigs designed using its software.
"This deal has a clear and compelling industrial logic," said Aveva's chief executive Richard Longdon, who will remain in charge of a group he has led since 1999. "(It) will diversify Aveva's end markets, significantly enhancing its position in oil and gas, power and marine, but also adding a big presence in other verticals including chemicals, food and beverage, mining water and pharmaceuticals."
Shares in both companies were up on the news and the deal will more than double the size of Aveva, which has more than 1,600 employees in offices around the globe with around a quarter of them in the UK, giving it annual revenue of about £534m and adjusted earnings of about £130m.
Longdon said Schneider had decided to structure the deal as a reverse takeover rather than the straight acquisition to retain more flexibility to make further acquisitions. "There was not an offer on the table to buy the business outright," he said.
The merged business will retain its listing on the London Stock Exchange, and Schneider Electric will need approval from Aveva's independent directors if it wants to increase its shareholding further or to delist the group. It will also see former assets of Britain's Invensys, bought by Schneider two years ago, united with Aveva.
Jean-Pascal Tricoire, chairman and chief executive of Schneider Electric, said: "We believe that through increased scale, complementary footprint and joint R&D capabilities, the transaction will generate synergies that will benefit customers and shareholders alike."