Schneider Electric Opens Courtship of Invensys; No Word Yet on Rival Suitors

With its eyes on marquee brands such as Wonderware, Foxboro, Eurotherm and Robertshaw, Schneider Electric, Paris, is said to be preparing a formal offer for Invensys, a U.K.-based conglomerate of industrial software, automation and control products.

Invensys disclosed on July 12 that Schneider had made an informal offer of £3.3 billion (about $5 billion) for the company. Schneider responded with a release confirming its interest, but saying little else. Schneider now has until close of business Aug. 8 to formally ask Invensys shareholders for the company’s hand.

Contrary to countless predictions from analysts and the general business media, a bidding war for Invensys had yet to break out this week, but potential rivals may be waiting until there’s a formal offer. Judging just by the movement of Invensys’s stock price, investors may be losing confidence that a rival bid will emerge. Invensys shares on the London Stock Exchange jumped above Schneider’s £5.05 per share offer to over £5.17 in the days after Schneider’s interest was disclosed, but by the middle of this week had settled back down to £4.98, still a premium on the £4.40 price it traded at before the announcement and well above the prevailing prices over the previous year, which ranged as low as £2.67.

Initial speculation about rival bidders focused on the handful of giants in automation and controls. Emerson Electric, St. Louis, approached Invensys with an offer last year but ultimately walked away. General Electric, Fairfield, Conn., was considered a likely suitor until Chairman Jeffrey Immelt said in an earnings call last week that Invensys “really doesn’t fit our screen as to the kinds of places where we put capital.” ABB, Zurich, Switzerland, and Honeywell, Morristown, Conn., have also been widely mentioned.

Siemens, Munich, Germany, was also mentioned by several commentators, but it has existing lines that would overlap some of Invensys’s more valuable brands. Besides, it’s safe to assume Siemens looked at the whole package last year before buying Invensys’s rail operations. That move gave Invensys £1.74 billion ($2.78 billion) that it used to improve its finances, largely by funding its pension obligations, which had been a source of difficulties for the company almost from the day it was formed in a merger of Seibe and BTR in 1999.

The value for Schneider comes from the potential to add substantially to its offerings for the process industries such as oil and chemical refineries, food processing and water treatment. Wonderware alone would give Schneider one of the leading industrial software platforms.

“If Schneider had Wonderware, it would change some of the dynamics on the process side of things,” said Frank Hurtte of River Heights Consulting. “It would give them new products to talk about.

“The main thing people pay attention to is the software. That’s the most complicated part. It would be easy to bundle some i/o into the mix that would increase the sale. Some of the Eurotherm stuff would match up well with portions of the PLC (programmable logic controller) business and the Wonderware business.”

Besides Wonderware, Foxboro was once a market leader in control and monitoring gear for process industries, but has lost ground to rivals such as Emerson, Siemens, ABB and Yokogawa. Nonetheless there are many customers still faithful to Foxboro, and the combination of Schneider’s Modicon PLCs and Modbus networking platform with Foxboro devices could be very powerful, says Hurtte.

Eurotherm adds another offering for the process market in temperature sensors and controls and data loggers and could open some doors in food processing such as pasteurizing systems for dairies.

Other Invensys lines such as Robertshaw also have industrial applications but are more prominent in temperature controls for the residential market. As it happens, that’s a comfort zone for Schneider as well thanks to Square D and other lines with heavy residential market share.

If Schneider were to go ahead with the acquisition, Hurtte said he’ll be watching to see how the story plays out for the companies’ distribution partners. In the North American market, Invensys sells Wonderware primarily through a network of specialized distributors, many of which operate under the Wonderware name. Schneider sells primarily through electrical distributors with established specialties in industrial automation technology, though with some exceptions.

“Schneider has been building these little companies and keeping them independent in the way they operate,” Hurtte said. “Their sensor team operates almost as a completely separate entity, to the extent of signing up and working with distributors in a territory that the rest of the automation group is not working with. Wonderware distributors tend to have a feel like value-added resellers instead of distributors, so it would be interesting to see if Schneider said, ‘We’re going to give them access to PLCs and sensors and not give Wonderware to distributors.’”