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Schneider's CEO Justifies Invensys Takeover

Sept. 12, 2013
Says Purchase Will Be a "Good Deal" for Both Shareholders and Customers, but What About Invensys' Brands?

In an exclusive interview with CNBC News, Jean-Pascal Tricoire, Schneider's CEO and chairman, said, "It's a very good deal for our customers, because our customers in the infrastructure segment need integrated solutions. Invensys and Schneider are neighbors in the world of automation, but they are just covering complementary fields."

The "good deal" refers to the $5.2-billion takeover of Invensys, the U.K.-based owner of such well-known automation brands as Wonderware, Foxboro, Triconex, Eurotherm and SimSci-Esscor.

It's all goodSchneider Electric's CEO and chairman, Jean-Pascal Tricoire, says his company's buy of Invensys is a "very good deal."

He added in the same interview, "And of course it's an interesting offer for Invensys shareholders. There is a significant premium. On the side of Schneider, due to the synergies that this combination brings, it's also a very interesting, valuable proposition."

Schneider estimated the merger would create savings of $211.5 million annually from both revenue synergies and cost savings.

How good a deal it will be for Invensys and those brands remains to be seen. Analysts at Gartner say the buyout emphasizes the importance of "operational technologies" (OT), placing Schneider in the same pool with ABB, General Electric and Siemens, and pointing out the advantages of the acquisition—to Schneider. Gartner adds that the OT companies "have been transitioning from industrial conglomerates. Expanding their software capabilities through acquisition is becoming the norm. Furthermore, this acquisition comes at a time when asset-intensive companies are revisiting their strategies for managing IT/OT convergence."

Gartner suggests that Schneider Electric is likely to use the various products and technologies from Invensys in multiple Schneider Electric divisions. That's where the rub may come for some of those well-known brands. Wonderware Intelligence, ArchestrA System Platform and IntelaTrac overlap with established Schneider applications. Others, such as Skelta BPM, ArchestrA System Platform, Wonderware Manufacturing Execution Solutions and SmartGlance, will fill gaps in Schneider Electric's portfolio for the food and beverage, chemicals, hydrocarbon processing and mining industries, adds Gartner's analysts.
However, Schneider's earlier forays into process automation technology have not been good for the acquired brands. Acquistion by Schneder has not been good for either Citect or Modicon.

Jim Pinto in his "Connections for Growth and Success" blog on Aug. 29 had a less sanguine view. "Schneider said the deal will generate significant revenue savings—$530 million a year by 2018—as a result of expanded offerings, complementary customer bases and from integration. But then, that's what everyone says up-front. It remains to be seen what will happen to the group of excellent people in the many Invensys companies."