Engineering software specialist Aveva today saw its shares soar 27% after agreeing to a £1.3billion “reverse takeover” by France’s Schneider Electric due to the slump in oil and gas prices.
The tie-up reduces Cambridge-based Aveva’s exposure to oil and gas markets, the source of about 45% of its revenue, and where lower oil prices have cut demand for rigs designed using its software.
Aveva, a subject of takeover speculation for months, will also build up its chemicals, mining and pharmaceuticals businesses and expand its market share in the Americas, a Schneider stronghold.
The complex deal will see Aveva buy Schneider Electric’s software division on a “debt-free cash-free basis”. Schneider will then pay £550million for new Aveva shares, giving it a 53.5% share in the FTSE 250-listed firm.
The agreement is expected to create an enlarged Aveva group with revenues of about £534million and underlying earnings of £130million.
In line with the takeover plans, Aveva will continue to be listed on the London exchange, while Schneider has agreed to a two year “standstill period”, during which it cannot increase its stake in Aveva.
Aveva said that given the relative size of the two companies involved, the deal would be classified as a reverse takeover, a method typically used by private firms to speed up their transition to public status.
About a quarter of the 1,600-strong workforce at Aveva, a software supplier to the industrial plant, power and shipping industries, is based in the UK.
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.”
This is not the first time Schneider has swooped for a UK software firm.
Two years ago it splashed out £3.4billion on industrial software firm Invensys, many of whose assets were absorbed by Schneider Software.
Jean-Pascal Tricoire, chairman and chief executive of Schneider Electric, said of the new deal: “We believe that through increased scale, complementary footprint and joint research and development capabilities, the transaction will generate synergies that will benefit customers and shareholders alike.”
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