Old industrial groups often like to spin off their sexier tech units to steal some of the light from their higher valuations. $73 billion Schneider Electric is making the opposing journey by attempting to buy out its 59%-owned UK software subsidiary Aveva, acquired after several attempts in 2017.
Schneider’s first motivation may be simply that it can. With net debt at less than half next year’s EBITDA, the energy management and industrial automation group can easily afford a 3.5 billion pound buyout, based on a 30% premium to the undisturbed share price. Aveva has also lost half its market value in the last year before news of Schneider’s plans sent the shares up 25% on Wednesday, but the price is still double its 2017 level.
The absorption of the UK group by its French parent would run counter to the valuation rationale put forward when the two groups combined their software operations. Still, Siemens Energy recently decided to buy out all of the underperforming Siemens Gamesa so its boss could knock it into shape. With Aveva warning on revenue and margins earlier this year, Schneider Chief Executive Jean-Pascal Tricoire may see a cheap way to keep it on a tighter leash. (By Pierre Briancon)
Source: Reuters.com