The deal will enable the world’s biggest maker of low- and medium-voltage equipment to become the global leader in the automatic transfer switch market, which delivers back up power in the event of outages, the Rueil-Malmaison-based company said in a statement yesterday. It’s already the biggest operator of the systems in China. The deal will probably generate savings of $40mn a year, chief financial officer Emmanuel Babeau told reporters, while the cost of implementing the synergies could be as high as $50mn.
“It’s a very important technology, including in hospitals and data centres, and it will become even more crucial with the development of renewables, as we’ll all be connected to numerous electricity sources,” the CFO said by phone. “We’re doing this acquisition at the core of our business to strengthen our global leadership in low voltage.”
The purchase marks Schneider’s latest step in an overhaul triggered partly by weakness in the oil and gas industries and other resource-based markets, including by selling its agricultural information provider Telvent DTN earlier this year. It’s also strengthening its presence in software and services, although Schneider dropped a second attempt to acquire a controlling stake in British industrial software maker Aveva Group over a year ago.
Schneider expects the purchase of ASCO from Vertiv, owned by buyout firm Platinum Equity, to close by the end of the year. The US company had sales of $468mn in 2016 and an earnings before interest, taxes, depreciation and amortisation margin of about 23%, Schneider said.
“Schneider is in the business of providing energy efficient solutions, and this acquisition takes it further in that direction,” Jawahar Hingorani, an analyst at Bloomberg Intelligence, said by phone.
The shares rose 4.2% to €68.84 as of 12:34am in Paris. That values the company at €41bn ($48bn).
The ASCO deal was announced on the same day as Schneider kick-started a strategic review of its struggling infrastructure business. All options are open, chief executive officer Jean-Pascal Tricoire told analysts. The CEO said he has “no idea” of the outcome at this stage, while he’s “very happy” with improvements.
Schneider could also sell smaller assets outside the infrastructure division, according to Babeau. “If we continue to prune the portfolio, that will be on things of a much smaller scale” than previous divestments, he said. Schneider raised its full-year revenue-growth target following strong sales at its building and industrial divisions. Excluding the struggling infrastructure unit, Schneider sees organic revenue growing between 3% and 4% this year, compared with an earlier target of 1% to 3%.
Revenue from the infrastructure division will decline by about 4% this year, versus the 4% to 5% drop previously seen.
The business makes power equipment used by electricity grid operators and water utilities.
Overall, adjusted earnings before interest, taxes and amortization advanced 8.3% to €1.72bn in the first half of the year, the company said in the statement. Revenue increased 2.7% on a comparable basis to €12.2bn.