France's Schneider in $5 billion takeover talks with Invensys

Jean-Pascal Tricoire, CEO of Schneider Electric
Antoine Antoniol | Bloomberg | Getty Images
Jean-Pascal Tricoire, CEO of Schneider Electric

France's Schneider Electric said it was in early talks to buy Invensys to boost its industry automation business in a deal that UK-based Invensys said valued it at about 3.3 billion pounds ($5 billion).

Invensys said it was likely to recommend Schneider's offer of 505 pence a share, which would represent a 15 percent premium to the stock's Thursday close on the London Stock Exchange.

Schneider has indicated it would pay 319 pence in cash and 186 pence in new Schneider shares, Invensys said in an emailed statement.

The French group, which confirmed the talks after Invensys issued a statement on the preliminary offer, said it had until Aug. 8 to say whether it intended to make a firm offer or walk away under UK rules. This could be extended with UK takeover panel consent.

Schneider, whose products help utilities distribute electricity and which makes automation systems for the car and water treatment industries, said last summer that it planned to step up acquisitions to boost sales and tap new markets.

Schneider had 2.8 billion euros ($3.7 billion) of operating cash flow at the end of 2012.

Invensys emerged as a potential takeover target earlier this year on speculation that the sale of its rail business could lead to substantial net cash and raise interest from suitors.

Societe Generale analysts said in late April Invensys could be valued at 460 pence a share following the disposal.

Invensys said in May it planned to return 625 million pounds to shareholders after selling Invensys Rail for 1.74 billion pounds to Siemens.

Schneider said on Thursday that a takeover of Invensys would lead to "significant cost savings" and "revenue synergies."

Invensys provides software, systems and controls to clients ranging from oil refineries and power stations to mining companies and appliance manufacturers, to help monitor, control and automate products and processes.

Its Industrial Automation unit supplies control systems, safety systems and instrumentation to customers operating oil refineries, nuclear power stations and petrochemical plants.

Invensys said its advisers are Barclays and JPMorgan Cazenove.