Pressure on Rees-Mogg over £9.5bn tech deal: French rival Schneider looks to snap up remaining stake in Footsie software giant Aveva
Business Secretary Jacob Rees-Mogg is facing a key test as one of Britain’s leading technology firms looks set to be snapped up by a French rival.
FTSE 100 software group Aveva is on the verge of disappearing from the London Stock Exchange (LSE) after Schneider Electric struck a deal to buy the 41 per cent of the company it does not already own for 3100p per share in cash.
The offer values Aveva at nearly £9.5billion and is a 41 per cent premium to its closing price on August 23, the last trading day before Schneider confirmed it was mulling a bid for the group.
Business Secretary Jacob Rees-Mogg (pictured) is reportedly looking at reversing the controversial takeover of British computer chip maker Newport Wafer Fab
But it is below the 4420p Aveva shares were trading at a year ago, raising fears it is being bought on the cheap.
The swoop is a major test for Rees-Mogg, who was appointed Business Secretary this month.
While Schneider already holds a controlling stake in Aveva, the takeover has fuelled concerns the UK’s tech sector is being hollowed out by overseas buyers and private equity sharks.
Russ Shaw, of Tech London Advocates, an organisation that promotes London as a global tech hub, said it was ‘disappointing’ whenever a British tech firm was acquired and called on the Government to work ‘much harder’ to encourage UK companies to list and remain on the LSE.
He said: ‘This is a good reminder that even though we have a lot of good British-grown tech businesses, they can disappear from the public market.
‘Therefore, we need to make sure that we continue to build a really strong pipeline of tech unicorns to list on the public market, ideally the LSE.’
Alasdair Young, at investment bank Panmure Gordon, said the UK was ‘never going to have an international tech juggernaut’ if firms kept being sold, saying: ‘Aveva is one of the biggest tech companies on the LSE. It would be a big shame to see it go.’
Founded in 1967 as the CADCentre, a research institute spun out of the University of Cambridge, Aveva became a private company in 1983 following a management buyout before listing on the London market in 1996.
It provides computer software to help engineers design major industrial projects as well as products that help run factories.
Schneider’s swoop is the latest in a flurry of bids for London-listed tech firms that will test the mettle of Rees-Mogg amid growing concerns it is too easy for foreign predators to buy key UK firms.
The buyout falls within the scope of the National Security & Investment Act, which gives the Government powers to block takeovers. Rees-Mogg will have discretion on whether to call the deal in for an in-depth review.
Schneider Chinese link fears
Schneider Electric is a French industrial giant providing software and automation systems to improve energy efficiency in buildings and factories.
Founded in 1836, it is one of the biggest companies in Europe with a market cap of nearly £59billion. It employs around 166,000 people.
Originally focused on steel-making and manufactured weapons in the 19th century, it divested its steel and shipbuilding businesses in the 1980s and 1990s to focus on electricals.
There are concerns about some of its international activities, notably its joint venture with Chinese conglomerate Delixi Electric since 2007.
Schneider took a controlling stake in Aveva in 2017 in a £3bn reverse takeover. In 2013, it bought London-based Invensys, a maker of computer systems for refineries, in a £3.4billion takeover.
At the time, Invensys was chaired by Sir Nigel Rudd, who became chairman of defence group Meggitt, which was bought by US rival Parker Hannifin for £6.3billion this year.
Three years later, Schneider took control of British retail brand Tower Electric, which provides fixings and fastenings such as cable clips to construction and electrical firms.
A key area of concern is likely to be Schneider’s joint venture with Chinese firm Delixi Group.
Former Tory leader Sir Iain Duncan Smith said the Government should intervene in takeovers to ‘stop Chinese companies from taking over’ the UK’s high-tech and strategic industries.
Last week, it was reported that Rees-Mogg could reverse the controversial takeover of British computer chip maker Newport Wafer Fab by Dutch firm Nexperia, which is owned by Chinese group Wingtech.
A decision is due by October 3 and its former owner is said to be orchestrating a bid to buy Newport Wafer Fab back.
Schneider may need to raise its offer to shareholders. Mark Kelly, at investment bank Cowen, said: ‘This realistically now all comes down to whether or not this is a good enough price.’