Engineering software firm Aveva agrees tie-up with Schneider Electric
Engineering software firm Aveva has confirmed a merger with the software arm of France's Schneider Electric to create a group worth more than £3 billion.
The deal, which comes after two failed merger attempts in the past two years, will see Schneider take a 60% stake in the combined firm and Aveva's shareholders own the remaining 40%.
Shares in Aveva soared by more than a quarter as investors cheered the long-awaited tie-up to form a n industrial software giant with combined revenues of around £658 million and earnings of some £146 million.
The merger will be structured as a so-called reverse takeover, with Schneider folding its software business into Aveva's operations and paying £550 million in cash, worth around 858p a share.
Aveva will pay a further £100 million or 156p a share to its shareholders once the deal is completed.
But Aveva will keep its headquarters in Cambridge and remain listed on the London Stock Exchange.
Philip Aiken, chairman 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."
He added: "Aveva will significantly expand its scale and product portfolio, increase its capabilities in the owner operator market, diversify its end user markets and increase its geographic exposure to the North American market, in line with our strategic goals."
It comes after the pair first began merger talks in July 2015, but those discussions broke down after Schneider was unable to separate its software assets, while a further attempt a year later also collapsed.
Aveva was founded 50 years ago after being spun out of Cambridge University.
It provides engineering software to owners, operators and engineering contractors across the power, oil and gas, marine and paper and pulp sectors.
The group employs more than 1,700 people across 30 countries and has a customer base of more than 4,000.
Schneider's software arm has a global footprint spanning North America, Europe, the Middle East, Asia Pacific and Latin America and has around 2,700 employees worldwide.
It has previously targeted UK software companies, having swooped on industrial software firm Invensys for £3.4 billion in 2013.
The Aveva deal is expected to complete around the end of the year.
It comes just over a month after Schneider agreed to buy US firm Asco Power Technologies for 1.25 billion US dollars (£970 million), in an all-cash takeover.
Schneider - a major firm in the electricity distribution market in France - is also considering its strategic options for a part of its infrastructure business, which could see it put up for sale.
Royal London Asset Management, which holds a 2.25% stake in Aveva, welcomed the deal for allowing UK investors to remain shareholders in the combined group.
Richard Marwood, a senior fund manager at Royal London, cheered the "interesting structure of the deal".
He told the Press Association: "In other deals where there is a foreign takeover, there is usually no way of staying as an investor in the enlarged group."
He added that the tie-up made sense, given the complementary nature of the two firms, cost savings and revenue opportunities on offer.
But he warned that the deal still had to "get across the line", having tried but failed twice before.