* Expands into energy efficient grid market
* Schneider to pay $40 per Telvent share, 36 pct premium
* Values Telvent at $1.36 bln; Enterprise value $2 bln
* Bid agreed by 40 pct Telvent shareholder Abengoa
* Telvent a leader in U.S. oil and gas pipeline IT
(Adds quote from conference call, additional comment)
By Leila Abboud
PARIS, June 1 French power network equipment
specialist Schneider Electric (SCHN.PA) is to buy energy
software provider Telvent TLVT.O for $1.36 billion as part of
its push into energy efficient grids and emerging markets.
The takeover bid is backed by U.S.-listed Telvent's main
shareholder and would give Schneider Electric a stronger
presence in software to complement its equipment sales.
Telvent's software helps manage electricity grids and
transportation systems serving industries like oil and gas with
a strong position in North and South America.
Schneider Electric said on Wednesday the cash offer values
Telvent -- which is 40 percent owned by Spanish conglomerate
Abengoa (ABG.MC) -- at $40 per share, or a 36 percent premium to
Telvent's average share price in the past three months.
The deal has an enterprise value of 1.4 billion euros ($2
billion) including the purchase of Telvent convertible notes,
fits with Schneider's strategy of making small-to-medium
acquisitions to bolster its existing businesses and expand into
emerging markets, such as India and Russia.
On Tuesday, Schneider announced the acquisition of 74
percent of Indian energy storage group Luminous for 215 million
"In the past two days we've announced two acquisitions that
are really just the strict execution of the strategy that we
explained to in November -- a very strong push in the direction
of new economies," Schneider Chief Executive Jean-Pascale
Tricoire said in a conference call.
In April, Schneider consulted bankers and lenders about what
would have been a much bigger deal, worth more then $30 billion,
to buy U.S. industrial group Tyco International TYC.N. The
talk spooked investors who didn't like the idea of such a large
deal and sent Schneider's shares down sharply. [ID:nLDE73C0AG]
Soon after, Schneider's CEO sought to reassure investors by
saying the company would focus on smaller deals over the next
For a FACTBOX on smart grid suppliers [ID:nLDE68R0UW]
"The deal fits in the "medium" category and as such there
may be some relief that it affirms the previous management
comments," Citigroup analysts Mark Fielding and Alexandre
Werbowy wrote in a research note. Given the Luminous deal
announced the same week he added that "it does potentially point
to a pick-up in the rate of activity."
Spain's Telvent makes information technology systems for the
electricity, transport, and oil-and-gas industries, and its
systems now manage more than 60 percent of the total oil and gas
in North American and Latin American pipelines.
Schneider shares were trading largely flat on Wednesday at
114.55 euros per share at 1045 GMT.
Schneider Electric said the deal would add to earnings by
the first year after the deal, excluding implementation costs.
By 2016, it sees 250-300 million euros of revenue synergies
and boost earnings before interest, tax and amortisation
expenses (EBITA) by 30-35 million euros.
Spain's construction-to-energy conglomerate Abengoa
agreed to sell its 40 percent stake in Telvent to Schneider in
the deal. Shares in Abengoa, which said it would book capital
gains of 135 million euros to 145 million euros from the sale,
were up 7 percent by 1046 GMT.
James Stettler, analyst at Unicredit, said the deal made
strategic sense and that the price was "not cheap but seems
reasonable" for Schneider.
Schneider is paying an implied multiple of 16 times earnings
before interest and taxes (EBIT) compared with its own valuation
of 10.4 times 2011 estimated EBIT and a sector average of 10.1
times, according to Citigroup.
"If you think about Schneider, they have a very strong
position in product, namely anything in electricity between
production and consumption," he explained.
"Now to improve efficiency of solutions you need more
software. Think about smart grids, smart transport, it all
requires more software."
Smart grid equipment, which can give utilities more control
over energy use, helps to smooth demand surges and possibly
allow consumers to save money by using power at off-peak times.
From providing transmission interconnections to installing
and managing meters, Europe's major industrial firms, including
Schneider and its rivals ABB ABBN.VX, and Siemens (SIEGn.DE)
have been expanding into the growing smart grid sector.
Schneider was advised by Santander on the transaction.
(Additional reporting by Lionel Laurent and Blaise Robinson;
Editing by Erica Billingham and Andrew Callus)