Schneider Electric and American Power Conversion (APC) have entered into a definitive merger agreement under which Schneider Electric will acquire all outstanding shares of APC for an enterprise value of approximately $5.5 billion. The price per share is $31 and will be paid in cash for a total amount of approximately $6.1 billion.
The board of directors of APC has approved this transaction. The supervisory board of Schneider Electric, following dedicated working sessions, fully supported the management board to pursue this transaction. By acquiring a global leader in the critical power market, and combining it with its subsidiary MGE UPS Systems, Schneider Electric becomes a pre-eminent worldwide company in the sector.
The critical power market enjoys a fast and sustainable long-term growth. This growth is driven by the need for power supply continuity in an increasing number of critical applications, concerns regarding reliability of the power grid and development of digital information traffic. Critical power is at the heart of one Schneider Electric’s core business: electrical distribution, of which it is the fastest growing segment.
APC, which is a global leader of critical power with approximately $2 billion in sales in 2005 and 7,600 employees, has enjoyed 12 consecutive quarters of double-digit sales growth. APC has 52 percent of its sales in the
APC is a global leader in small and medium uninterruptible power supply (UPS) systems (representing approximately 74 percent of APC sales). The company also enjoys among the fastest growth rate in the industry in large UPS systems (more than 30 percent per year). This strong growth in large UPS has required significant investments which have negatively impacted APC’s operating margin (9.4 percent in 2005). Thanks to its experience in this industry through MGE UPS Systems, Schneider Electric is very confident it can rapidly improve APC’s profitability on a going forward basis.
The APC acquisition is expected to result in significant value creation in excess of $3 billion arising from the turnaround in large UPS systems, the strong complementary characteristics with MGE UPS Systems as well as the synergies with Schneider Electric’s product offering.
The combination of both companies will:
- Generate significant synergies (including, among other things, purchasing, R&D, support functions, sales, services) estimated at around $220 million, of which 70 percent are anticipated to be achieved by 2009;
- Leverage significant R&D programs and APC’s innovative architecture;
- Accelerate the profitability improvement of large UPS systems thanks to MGE’s strengths in services;
- Provide customers with the broadest products and services offering;
- Benefit from complete geographical coverage as well as significant production capacity in
- Provide customers with critical power, electrical distribution and building automation solutions.
This transaction is anticipated to be accretive to Schneider Electric EPS from 2007 and to meet Schneider Electric’s three year ROCE criteria for acquisitions.
