UPDATE 1-Schneider approaches Tyco about $30 bln deal-report

Tue Apr 12, 2011 5:08pm EDT

* Deal would create world's largest security systems maker

* Early leaks could make deal less likely - report

* Tyco shares rise sharply, then ease a little (Adds CNBC report, share movement, background)

NEW YORK, April 12 (Reuters) - French engineering giant Schneider Electric (SCHN.PA) has sent a letter outlining its interest in a $30 billion takeover of Tyco International Ltd (TYC.N) to create the world's leading maker of security systems, the Daily Telegraph newspaper reported on its website on Tuesday.

Tyco shares rose nearly 4 percent on Monday, after Bloomberg reported a possible takeover offer from Schneider. The shares rose a further 7 percent on Tuesday.

CNBC reported after the close of trading on Tuesday that early stage leaks about the talks had made a deal less likely, and Tyco shares eased back about 1 percent to $51.95 in after-hours trading.

The Tyco board has allowed the start of due diligence, according to the Telegraph report, which cited unnamed sources. However, it said Tyco is thought to be unwilling to accept an offer at less than $65 a share from Schneider.

A Tyco spokesman had no comment. Schneider could not immediately be reached outside normal business hours.

To get a deal done, Schneider might be willing to give Tyco CEO Edward Breen a seat on the board of the combined company, the Telegraph reported.

JPMorgan and Bank of America Merrill Lynch have been working with Schneider since September on the takeover deal, the Telegraph said.

The Telegraph report said Schneider's bankers have been looking at a variety of ways of financing the deal, and it cited sources as saying the most likely way a takeover would be financed would be via a part-cash, part-share offer.

Tyco's market capitalization is roughly $25 billion, including Tuesday's gains. Schneider has a market value of about $46 billion. One credit analyst said Schneider would need to issue equity since it could not borrow enough to pay for such a deal.

Schneider, which competes with Germany's Siemens (SIEGn.DE) and ABB (ABBN.VX) of Switzerland, has made a series of small to medium-sized acquisitions over the past year, many of them focused on emerging markets like India and Russia.

Besides security services, Tyco makes fire safety systems and industrial products such as valves and controls used in water and chemical systems. (Reporting by Nick Zieminski; Editing by Bernard Orr and Tim Dobbyn)

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