French company Schneider to acquire APC for $6.1 billion
30 October 2006
Mumbai: Schneider Electric SA and American Power Conversion Corporation have entered into an agreement under which the former will acquire the outstanding share of the latter for $31 per share.
transaction value is estimated at $6.1 billion.
The combination of APC, the world's biggest supplier of circuit breaker, and Schneider Electric will create the largest maker of equipment for both single-phase and three-phase uninterruptible power supply (UPS) systems as well as the preeminent provider of integrated systems for IT and data center applications that protect computers and factories from power outages.
Schneider, based near Paris, said it would fund the deal with a €4.5-billion ($5.7 billion) loan and €1.2 billion of new stock.
The acquisition of APC will double Schneider's sales of electrical-surge protectors and emergency-power systems. The market for UPS systems is growing at eight per cent a year with clients like Microsoft, Boeing and AT&T seek to guard against blackouts. Power outages can cost chipmakers $4.8 million an hour, the French company said.
APC, based in West Kingston, Rhode Island, is cutting about seven per cent of its workforce to save as much as $32 million after second-quarter earnings fell 41 per cent to $24.71 million.
APC's board has approved the deal and will recommend it to shareholders.
Demand for the UPS systems has jumped as companies increasingly rely on digital technology that requires a constant supply of electricity. APC's products protect computers, data centres and hospitals against damaging surges and switch to emergency batteries or shut systems down in the event of a blackout.
The takeover is Schneider's biggest since the 2001 purchase of Legrand SA, the world's No. 1 maker of power sockets and switches and the seventh-largest of a US company by a French buyer, according to agency reports.
Schneider expects to complete the purchase in the first quarter. The transaction will be funded through a loan from BNP Paribas SA, cash reserves, debt and a capital increase equivalent to about six per cent of the company's market value, the company said.
The APC acquisition ranks below deals like Alcatel SA's $13.4 billion bid for Lucent Technologies and Cap Gemini's $10.5 billion purchase of Ernst & Young's consultancy business in 2000.