France's Schneider Electric to buy UK software company Aveva for £9.4bn
Schneider currently owns about 60% of industrial software company Aveva, puts in offer for remaining 40%
French digital automation and energy management firm Schneider Electric says it will move forward with a full takeover of Cambridge-based software company Aveva Group Plc in a deal that values the industrial software maker at about £9.48 billion ($10.7 billion).
Schneider is making an offer of £31 (about $34.8) per share, which represents around 41% premium to Aveva's closing share price on August 23, when Schneider first revealed its plans to explore a complete takeover. Aveva's share price was at its all-time high on that day.
Schneider expects the deal to close in 2023.
Almost 60% of Aveva is already owned by Schneider. In 2017, Schneider completed a reverse acquisition that gave it majority control of the Aveva and allowed the British company to keep its London listing. At that time, the French company paid £3 billion for the transaction.
The latest deal means Schneider will acquire the remaining 40% shares in the FTSE 100 Group.
Aveva software will continue to be "totally agnostic" after the deal is completed, meaning it will function with or without Schneider Electric hardware and will remain an independent company, Schneider Electric said.
Additionally, Aveva's employees won't be incorporated into the Schneider team.
The strategy, according to the French company, will preserve Aveva's unique culture as a software company.
Schneider said that gaining full control of Aveva will assist in the expansion of the two businesses by enabling Schneider to combine its own energy proposition with Aveva's process data and tools.
"Schneider Electric has been a supportive shareholder and partner in the strategic development of Aveva since 2018, most recently in the acquisition of Osisoft, and I am confident that Schneider Electric will continue to build on that legacy," Philip Aiken, Aveva's chairman, said.
Spun out of Cambridge University in the 1960s, Aveva is a FTSE 100 firm, with over 6,400 employees. Its software has focused mainly on the energy, manufacturing and infrastructure sectors, although it has expanded beyond that in recent years.
"We are proud of Aveva's track record in the UK, one of Schneider Electric's most important and strategic markets, and will maintain its headquarters in Cambridge, allowing us to continue to benefit from the region's thriving technology community," Jean-Pascal Tricoire, CEO of Schneider, said.
According to Tricoire, Schneider also wants to work with Aveva to transition to a subscription-based business model and collaborate in areas like R&D.
M&G, a top-20 Aveva stakeholder and owner of 0.75% of the group, said that it would vote against the merger because it undervalued the company's long-term potential.
Another of Aveva's top 25 shareholders said they would accept the purchase "through gritted teeth," adding that it is an example of a more widespread undervaluation of UK stocks.
A group of Aveva directors judged to be independent have recommended Schneider's offer to the Aveva's minority shareholders. For approval, it will now need at least 75% of minority investors to support it in a vote held in November.
UK tech firms are attractive acquisition targets
The announcement comes at a time when UK tech firms have become attractive acquisition targets for foreign businesses, as a result of the low pound and Brexit slashing valuations. It will leave the London stock market with very few large IT businesses.
Canadian Open Text Corp recently made a $5.1 billion bid for Micro Focus International, NortonLifeLock's is purchasing Avast, and US private equity group Thoma Bravo recently made an acquisition offer for AI security company Darktrace.
Other potential acquisition candidates in the UK tech sector include Kape Technologies, The Sage Group, Redcentric and Keywords Studios.