Threat to Schneider's Invensys takeover

The takeover, which values Invensys at 502p per share, was accepted by Invensys’ board on Wednesday.

However, the deal has yet to be approved by shareholders, who are waiting for further documentation from Schneider and notices regarding a court meeting and general company meetings to discuss the offer.

ARC research director, Europe David Humphrey told Process Engineering that this leaves Schneider open to being gazumped by a rival.

“The deal in not yet a done deal,” said Humphrey.

“The needs to be approved by shareholders and that could take weeks. In the meantime another company could come in with a better offer and the whole thing is upset.”

He identified Emerson and Honeywell as the two most-likely candidates to make rival bids, as acquiring Invensys would given them “access to its client base and remove a key competitor from the market”.

Neither Emerson or Honeywell were available for comment.

By acquiring Invensys they get the crown jewell that is Foxboro

ARC research director, Europe David Humphrey

However, Frost and Sullivan industry analyst for Industrial Automation & Process Control, Europe Karthik Sundaram said that while Emerson and GE had both reportedly been interested in Invensys’ Foxboro DCS suite, he expected Schneider to close the deal.

“I used to be an Invensys employee and there was always takeover talk,” said Sundaram.

“It’s not over yet but this time around it looks more concrete. Emerson and GE have had their eyes on Foxboro, but I don’t think Invensys would like to break up the company by selling off different products to different companies, which is why I think the Schneider deal stands a very good chance of getting done, especially since Schneider is now so far ahead of any rivals in the acquisition process.”

Game changer

Both Sundaram and Humphrey agree that if the deal is completed, it has the potential to raise Schneider to a level where it competes with the top players in market by being able to offer a complete process solution.

“Of all the possible combinations of industrial mergers this is probably the one that offers the most value for both companies,” said Humphrey.

“The two companies are very different, and what you need to do as a successful supplier these days is be one that covers all areas of industry - the most successful companies are the ones that do that, like ABB or Siemens.”

Humphrey added that the highest area of growth in the market has been on the process side, an area where Schneider is currently lacking due to the fact it “doesn’t have a full-blown DCS offering”.

“By acquiring Invensys they get the crown jewell that is Foxboro,” said Humphrey.

“Firstly because they gain a DCS and an established customer base - which is important because the process industries don’t change suppliers very often. They also gain a process portfolio. To be complete it needs to be a broad portfolio to deliver complete solution, and by gaining the Foxboro DCS and Triconex safety systems they do just that.”

In terms of the benefits of the deal for Invensys, Sundaram said it was likely to make the company and its products more competitive.

Invensys will have greater financial muscle and a more positive strategy that will help Invensys products

Frost and Sullivan industry analyst Karthik Sundaram

“Invensys was going through a tough time, mainly at the managerial level,” said Sundaram.

“Now since Schneider has come in Invensys will have greater financial muscle and a more positive strategy that will help Invensys products. It also creates more competition for the like of Siemens GE and Honeywell, so it’s good for the customer too.”

Risks

Even if the deal does go through Humphrey warned that Schneider’s track record of integrating acquisitions was pretty poor compared to its rivals, and it will also have to decide what it does in the areas where there are product clashes.

“With companies like ABB and Siemens, acquired companies are branded ABB or Siemens from day one, but Schneider doesn’t have the best track record here,” said Humphrey.

“For example, it took a long time for Elau to merge into Schneider following Schneider’s acquisition.”

More problematic, perhaps, is the fact that Invensys’ Wonderware brand is a direct competitor of Schneider’s Citect.

“Invensys’ second crown jewell is Wonderware, which produces great HMI visualisation software and MES products,” said Schneider.

“However, Schneider owns Citect, and both Wonderware and Citect do exactly the same thing.”

Schneider has stated its intention to achieve cost savings of approximately €140 million per annum by 2016. Whether this will be restricted to cost-cutting of back office functions like administration or will include the merging of product lines remains to be seen.