Exclusive: Avago nears $1 billion Schneider unit buy - sources

NEW YORK/PARIS Mon Aug 6, 2012 6:51pm EDT

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NEW YORK/PARIS (Reuters) - Avago Technologies Ltd (AVGO.O) is close to buying Schneider Electric SA's (SCHN.PA) U.S.-based sensors subsidiary, according to three people familiar with the matter, a deal that could fetch around $1 billion for the French conglomerate.

Avago, a chip maker that began as Hewlett-Packard Co's (HPQ.N) components division in the 1960s, is in exclusive talks to buy Schneider's Custom Sensors & Technologies unit after beating out a private equity consortium comprising Carlyle Group (CG.O) and PAI Partners in the auction, the people said.

Avago, jointly headquartered in San Jose, California, and Singapore, was spun off from Agilent Technologies Inc (A.N) in 2005, which itself had been carved out of HP in 1999.

The company, with a market capitalization of roughly $9 billion, makes semiconductors used in mobile phones, consumer appliances, power generation and renewable energy systems as well as factory automation.

The Schneider subsidiary is valued at around $1 billion, one of the people close to the deal said on Monday. Other people previously said the unit could be worth more than $1 billion.

A Schneider spokeswoman declined to comment, while Avago did not return calls for comment. All the sources asked not to be identified because the matter is not public.

Schneider hired JPMorgan Chase & Co (JPM.N) to sell the Moorpark, California-based unit last year and initially planned to start an auction around August 2011, sources told Reuters at the time. But the process was delayed as volatile financing markets made it harder and more expensive for private equity buyers to complete deals, the sources said.

As financing for leveraged buyouts has become more readily available this year, the unit has gone on the auction block this summer, according to people familiar with the matter.

The auction's revival underscores the eagerness of some European companies to tap a recovering U.S. merger market, either to expand through acquisitions or refocus their strategy and raise cash by divesting U.S. assets.

The Schneider subsidiary makes sensors for the automotive, aeronautics, transportation, energy and infrastructure industries. The business has about 4,700 employees worldwide and posted 2011 sales of $660 million, according to the company's website.

Schneider, the world's biggest maker of low- and mid-voltage electrical equipment such as transformers and circuit breakers, is looking to shift business away from the supply of products used in construction, which have become commoditized.

In February, it announced a strategic plan for the next three years to drive growth from its service business, which provides infrastructure and IT support in addition to equipment and accounts for more than a third of Schneider's total business.

As part of the plan, Schneider is targeting cost cuts of 900 million euros to 1.1 billion euros by 2014 from acquisition synergies as well as streamlined supply chains and purchasing.

(Reporting by Soyoung Kim in New York, Christian Plumb in Paris and Simon Meads in London; Editing by Leslie Adler and Matthew Lewis)

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