A buyout of UK industrial controls and software group Invensys (ISYS) has been doing the rounds in City pubs for months. I flagged that possibility as long ago as December (here), after the £1.7 billion sale of its rail arm and when the shares were close on 37% below today's 506p. In fact, it's been talked about for so long, the story had looked liked running out of steam.
But today comes confirmation that French-listed engineering group Schneider Electric (SCHN:PA) has tabled an offer worth 505p per share, sparking a 15% rise in the UK firm's shares. If you buy that old saying about 'timing being everything,' investors might reasonably wonder why it's taken so long. Pitching a bid at the start of the year that offered the same rough 15% valuation premium would very likely have been well-received, and would have saved the French firm about £250 million, if my back-of-notebook calculations are right.
Still, Invensys shareholders will be happy they didn't. They might also be pleased to be spared any possibility of being dragged into a potentially expensive acquisitions spree down the line if Invensys stays independent. The group has history when it comes to destroying shareholder value in this way, as I spelled out in Shares just this week (subscribers can read here).
But the deal is not sealed yet. What could scupper the bid is that it's not all-cash. Based on the 319p cash/186p shares blend, that's over a third of the price in Schneider stock. I don't know the company well, and it's quite possible that neither do many Invensys shareholders. It's not like buyouts of many small owner/operator firms, where getting the major owners to buy into the bigger story is important. No, Invensys' share register is full of City institutions (Prudential, Schroders, BlackRock for example), and what would they want with a piece of a potentially unknown entity. They're more likely to demand straight cash that can be re-invested elsewhere at their leisure and in companies of their choosing.
This might not be a huge hurdle, I suspect getting both managements round a table could quickly iron out such concerns, and recalibrate the offer to suit. But private investors in Invensys can do little more than wait. It could go either way, although, that the shares have settled at barely a fraction over the tabled offer price tells us that the market doesn't see a rival bidder emerging.
