CEO Richard Longdon believes the acquisition of French company Schneider Electric, announced in the UK this morning, could turn Cambridge-based AVEVA Group into a global software giant worth around £3 billion with a headcount of some 3,500 people.
The complex deal constitutes a reverse takeover of AVEVA by Schneider under UK listing rules but the power play will be in AVEVA’s hands.
I understand that the AVEVA name stays, that Longdon (above) will steer the growth strategy as CEO and that Cambridge will continue to be at the very heart of a massive expansion programme.
Schneider will own 53.5 per cent of an enlarged AVEVA Group. AVEVA gets Schneider’s industrial software assets, including former Invensys software, for which Schneider will pay £550 million. Based on the current AVEVA share price, 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. The net result, according to management of both companies, will be the creation of the world’s leading industrial software business.
The endgame represents a fairytale rise for a company that started out in Cambridge in 1967 with the establishment of the Computer-Aided Design Centre or CADCentre – part of the much-vaunted Cambridge Phenomenon set.
The original entity was a government-funded research institute created by the UK Ministry of Technology with a mission to develop computer-aided design techniques and promote their take-up by British industry. The centre carried out CAD research, and some of its early staff members, such as brothers Dick Newell and Martin Newell, went on to become well known in the worldwide CAD community.
CADCentre became a private company in 1983, was the subject of a management buyout in 1994 and became a publicly quoted company in 1996. It changed its name to AVEVA in 2001 and through a powerful combination of organic growth mingled with some canny acquisitions under Longdon’s stewardship has significantly expanded its industrial software portfolio.
The managements issued a combined statement to London Stock Exchange which said: “The transaction will create a global leader in industrial software, with scale and relevance in key markets and a best in class technology portfolio with combined revenues and Adjusted EBITA of c. £534 million and c. £130 million, respectively.”
They added that the move would also diversify and “substantially enlarge” AVEVA's end-markets – enhancing its position in Oil & Gas, Power and Marine while adding leading positions in other verticals including Chemicals, Food and Beverage, Mining, Water & Waste Water, and Pharmaceuticals.
The deal should also prove a winner territorially. For example, AVEVA will be able to piggy-back Schneider Software's exposure to the Americas market. The Americas will contribute approximately 36 per cent of revenues in the enlarged AVEVA Group – doubling the current 18 per cent of AVEVA's Americas-related revenues today.
The managements added that the enlarged group would be an even stronger player, best armed to take advantage of future acquisition opportunities. The enhanced AVEVA will continue to trade on the UK’s main market.
The existing AVEVA board will remain on completion – specifically chairman Philip Aiken, CEO Richard Longdon (pictured above) and CFO James Kidd - “to drive the strategy, implementation and integration of Schneider Software.”
Longdon 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.
“The transaction is expected to provide significant value to our shareholders via the upfront cash payment and a share of the Enlarged AVEVA Group to benefit from synergies and a compelling equity story underpinned by an enhanced strategic positioning.”
Jean-Pascal Tricoire, chairman and CEO of Schneider Electric added: “Working on a combination of AVEVA and selected Schneider Electric industrial software assets represents a promising opportunity for the stakeholders of both companies.
“The combination will create a global leader in industrial software, with a unique portfolio of asset management solutions from design & build to operations and will address customers' requirements along the full asset life cycle in key industrial and infrastructure markets. It will also create the right environment for the software teams to develop aggressively their business, while benefiting from the multiple commercial access of Schneider around the world.
“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.”
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