Atlas Copco buys Edwards in a Hot Summer

The Edwards group, previously known as Edwards High Vacuum, published a statement on 19 August advising shareholders of an agreed acquisition of the company by Atlas Copco, of Sweden. Shareholders will receive up to $10.50 per share in cash, making the total transaction value approx $1.6Bn, including the debt repayment, the largest acquisition by Atlas Copco for some 14 years. The deal represents an investment of 6.42 times EBITDA. Edwards is quoted on NASDAQ. The Edwards statement is as follows:

Edwards Group Limited (“Edwards”) a leading developer and manufacturer of sophisticated vacuum products, abatement systems and related value-added services, and Atlas Copco Group (“Atlas Copco”), the Sweden-based provider of industrial productivity solutions, today announced that the companies have entered into a definitive merger agreement in a transaction valued at up to approximately $1.6 billion, including the assumption of debt.

Under the terms of the merger agreement, a subsidiary of Atlas Copco will acquire Edwards for a per-share consideration of up to $10.50, which includes a fixed cash payment of $9.25 at closing and an additional payment of up to $1.25 per share post-closing, depending on Edwards’ achievement of 2013 revenue within the range of £587.5 million to £650 million and achievement of a related Adjusted EBITDA target within the range of £113.9 million to £145 million. The transaction is expected to close in the first quarter of 2014.

Depending on the amount of any additional payment, the merger consideration represents a premium of approximately 11% to 26% to Edwards’ 30 day average closing share price of $8.33 up to August 16, 2013, the last trading day prior to this announcement. Edwards priced its initial public offering on The NASDAQ Global Select Market on May 10^th 2012 at $8.00 per share.

Edwards’ shareholders representing approximately 84% of the current shares outstanding have entered into voting agreements with Atlas Copco to vote in favor of the merger, subject to the conditions set out in the voting agreements. Further, the Board of Directors of Edwards unanimously recommends the offer to all Edwards shareholders.

Edwards and Atlas Copco have a complementary businesses fit. Both companies share a similar strategic direction, with growth focused on technology leadership and customer service. The benefits of greater scale will help accelerate Edwards’ growth strategy and provide more opportunities for Edwards’ employees. Upon completion of the transaction, a new Vacuum Solutions Division will be formed within the Atlas Copco Compressor Technique business area, with headquarters in Crawley, UK.

Jim Gentilcore, Chief Executive Officer of Edwards, said, “This strategically and financially compelling transaction provides the opportunity for our stockholders to receive an attractive premium for their shares. On top of the cash payment at closing, analyst consensus for the full year and our strong start to the third quarter leads us to believe it is realistic for us to achieve the results that would deliver an additional cash payment towards the upper end of the range to our shareholders.”

Gentilcore continued, “This transaction also delivers many benefits for Edwards’ customers and employees. The two companies share very similar strategic goals, strong brands and leading market positions. The Edwards brand and reputation will benefit from the support, expertise and financial strength that Atlas Copco will bring.”

Ronnie Leten, President and CEO of Atlas Copco, said, “We recognize the strength of Edwards’ people and products as well as their excellence in technology and innovation. We are excited that this professional company will join our Group.”

The merger, which has been unanimously approved by the Boards of Directors of both companies, is subject to shareholder approval, antitrust clearance, and customary closing conditions.

Barclays and Lazard acted as financial advisors to Edwards on the transaction. Legal advisors to Edwards are Davis Polk & Wardwell London LLP,Weil Gotshal & Manges LLP and Maples & Calder.

Insider review of Schneider bid

The main story in the August issue of the Industrial Automation INSIDER Newsletter is a review of the Schneider Electric $5+Bn bid for Invensys, as shown below. Plus other articles discuss the spin off of the old Valmet from the Metso Group in Finland, and developments from Krohne, including the NIR spectrometer developed by Bayer for their chemical plants, and the intergrated HART transmitters in the Krohne SmartSens pH and conductivity analytical sensors.  Other news from ABB, Yokogawa, and Offshore Europe, plus reports about Innominate mGuard firewalls, Wipro water industry ambitions and HMS Anybus interfaces enabling machinery to communicate with any plant network, such as Profinet, DeviceNet etc. For subscription information please see http://www.iainsider.co.uk

Schneider justifies $5Bn price tag for Invensys: sees automation and power as good fit to expand offering

Jean-Pascal Tricoire, the chairman and ceo of Schneider Electric, had a comprehensive presentation prepared to explain their interest in acquiring Invensys, on the day of the meeting scheduled for discussion of the Schneider half year results, on 31st July. Tricoire announced their intention to acquire the Invensys group on terms similar to those outlined earlier in the month by the Invensys statement, and announced the backing of the Invensys board, backed by formal undertakings from each of them to sell their individual personal and family share-holdings to Schneider.

Elsewhere in this newsletter  the build-up to the offer, following the Invensys disclosure of the on-going discussion with Schneider, is described.

The logic for the deal 

The Schneider offer document describes themselves as ‘The global specialist of
solutions integrating power and automation technologies to help customers
manage energy and drive efficiency’. It then adds – ‘Operational efficiency is further
driven by software, as Information Technologies (IT) and Operational
Technologies (OT) converge’. This IT/OT link is a major piece of their logic for
wanting to acquire the Invensys automation businesses.
Schneider explain: “in the industrial and infrastructure end-markets, integrated solutions, combining power and automation technologies, drive operational efficiency. Industrial automation is an attractive growth market per se. The integration of automation and power offerings – supported by low voltage, medium voltage and critical power technologies, a key strength of Schneider Electric – will enable a new level of performance. Such integrated solutions are especially relevant to e l e c t r o – i n t e n s i v e customers. Operational efficiency is further driven by software capability and connectivity skills, as IT and OT converge.”

“Schneider Electric believes the businesses of Schneider Electric and Invensys to be highly complementary to respond to these business trends, with the combination representing a unique opportunity to create a global leader in industrial automation, advanced software solutions and power solutions. This will enable the enlarged group to offer a broader range of systems and services to new and existing clients.”
Due diligence and benefits Throughout the analysts’ questions Tricoire maintained that the feedback from their own customer base had been that Invensys was the right partner, for Schneider to link with, and that undoubtedly the two companies were
complementary, Schneider bringing the power management and electrical interface
to enable a total electrical project capability. The only criticism heard of Invensys was that the group was not seen as financially stable, in the longer term, but this would be solved by an acquisition by Schneider.
In addition the Invensys presence in process automation markets complements the Schneider market presence with strength and penetration in the discrete and hybrid automation areas. The integration of Invensys with the Schneider industry business will increase the share of revenues derived from solutions and services from 24% to 40%, decreasing the percentage attributed to product sales. Schneider see this as a good thing, increasing the share of recurring and high added-value revenues for the business. They also see a positive benefit in the change to the cyclical profile of the business, increasing significantly the share of revenues from long cycle activities!
Financial benefits 
In financial return figures the acquisition is forecast to give Schneider the extra benefit of cost savings of around Euro140m by 2016 from the current Invensys operational cost level, plus increased revenues of around Euro400m by 2018 as a result of the larger offerings from the group, leading to additional earnings of Euro65m per annum, on top of the existing Invensys earnings rate. In year 3 Schneider see return on capital (after tax benefits) of 10% to 11%. The future of the Invensys Appliance segment within this has not  been considered as yet.
Areas with strong brands Schneider sees Invensys as having strong brands and presence in the automation market, and were obviously keen to add their power solutions alongside the Invensys industrial automation and advanced software. So their comments in relation to Foxboro (DCS and equipment), Triconex, Wonderware, SimSci and Avantis seem to indicate that these would continue as the lead for Schneider in their market areas, bringing forward Schneider power equipment, SCADA presumably, and PlantStruxure PES systems as appropriate – good news for Mike Caliel and his industrial automation business area. Tricoire said that his due diligence teams had been impressed with the people they had met in their discussions, with solid teams, on top of their projects.
The future?
For Invensys the deal with Schneider looks positive: the shareholders also get a good deal.

For the industry the deal would retain Invensys as a separate independent DCS and automation software supplier, claimed by Schneider as #3 in terms of installed base. This is also good news for journals and newsletters, like the INSIDER. The deal will also add a strong electrical services supply arm, making Schneider+Invensys compete almost on a par with ABB and Siemens. Then, with Schneider a dedicated Ethernet enthusiast, maybe the two together will also develop into a new discrete and hybrid supplier, competing for the typical Rockwell clients.

For Emerson, Honeywell and Yokogawa, they lose a weaker competitor, and miss out on acquiring, or future scavenging on, the significant installed base of Invensys systems. They gain a rejuvenated competitor, with strong asset backing, wanting to re-take their place at the table. We have yet to see if anyone else thinks this place at the table is worth fighting for, as there are still three months to go before the name is changed forever.

Yokogawa wins water supply control contract for Bali

Yokogawa has received an order from PT Waskita Karya (Persero) Tbk, a major Indonesian construction company specialising in the power plant and water supply and wastewater treatment sectors, to supply the automation system for the Petanu water treatment plant that it is building at the Sanur beach resort area on Bali’s southeastern coast for a municipal water utility  that is overseen by the Indonesian government’s Ministry of Public Works.

The Petanu water treatment plant will produce 300 litres per second (approximately 25,920 cubic metres per day) of clean water for Gianyar Regency, Denpasar City, and Badung Regency. It is scheduled to start operation in September 2013.

Indonesia is the world’s fourth most populous country, and its infrastructure is being rapidly developed to meet the growing needs of its urban population and the tourism industry. The Petanu water treatment plant is a key to ensuring a stable supply of clean water for southeastern Bali.

The automation system that is to be installed at the Petanu water treatment plant includes the FAST/Tools SCADA (Supervisory Control & Data Acquisition) software package, the Stardom network-based control system, analysers, and a variety of field devices such as Admag series magnetic flowmeters. Yokogawa Indonesia will be responsible for the entire project, from engineering to delivery, installation, and commissioning.

Yokogawa was able to win this order because of its ability to provide a “one stop” solution comprised of field devices, control systems, and other products that will meet a wide range of operation and maintenance needs and thereby improve the efficiency of water production.

Water shortages are becoming a serious problem in many parts of the world, particularly in developing countries, because of rapid economic and population growth. According to a report entitled “Future vision and policy response toward water business industry” that was released by the Japanese Ministry of Economy, Trade and Industry in April 2010, the global water market is projected to grow from 36 trillion yen in 2007 to 87 trillion yen in 2025.

Encouraged by the success in winning this order, Yokogawa will seek to expand its share of the water-related control business in Southeast Asia and other emerging regions by providing water supply infrastructure solutions based on its extensive experience in water treatment applications and technical expertise in automation systems.

BYOD is viable industrially

 Oliver Sturrock, CTO of Schad Automation explains why HTML5 and BYOD technology will be penetrating more industrial plants very soon.

BYOD ‘Bring Your Own Device’ has reshaped the way technology is purchased, managed and procured. What originated as a trend amongst white collar business workers has now grown to the point that 62% of companies either already have a BYOD policy in place, or plan to do so by the end of 2013. (This is based on research released by ZDNet/TechRepublic in their 2012/3 BYOD Business Strategy Survey)

In its basic form, BYOD refers to the practice of employees making use of personal technology devices – tablets, smartphones and laptops – in their workplace. Its practical definition varies from workers simply accessing work related emails on personal smartphones or tablets, to organizations subsidising the cost of their workers’ own mobile devices, in return for them using these devices during their working day to access business applications and data.

Consumerization of IT influences the adoption of BYOD

We all like to have the latest gadgets and technology has become a lifestyle statement. So much so, that the distinction between a worker using business technology and being a direct consumer of personal technology is eroding. The rapid pace at which consumer mobile technology continues to advance means there will be constant demand from the consumer/worker to be using up to the minute devices – whether at work or during leisure time. Maintenance engineers working with automated assets are no exception to this trend.

This introduces another major trend influencing the adoption of BYOD strategies within organisations – the so-called ‘consumerization of IT’. It refers to the tendency for employees to have more advanced technology to manage their personal lives than might be available for their use within the workplace. Businesses need to adapt to the challenges that consumerization of IT creates, particularly in terms of the expectations users may have of technology they are required to use within the workplace. Again, industrial and engineering users are not exceptions to this need.

How is technology accelerating BYOD within industrial environments?

Additional advances in application development technology – specifically in the form of HTML5 – have made BYOD a viable IT strategy in the short to medium term. HTML5 is a ubiquitous technology that allows software developers to create a single application which really can run on any device, and support offline working.

Support for offline working

The ability for HTML5 to support so called ‘disconnected working’ offers another specific benefit for automation users, especially in the context of mobile enterprise asset management – EAM. Maintenance engineers may experience extended periods within the working day when they need to continue working whilst disconnected from the main EAM system.  When breaks in coverage occur, data captured is stored locally on the device. At the end of the shift when they come back into coverage, all this is uploaded back into the EAM system.

Today, every worker is much more than an engineer or technician responsible for asset maintenance. They are consumers and users of up-to-the-minute technology: after a day’s work they consume media via iPads, Skype with friends on Android devices and communicate using Twitter and Facebook. Being surrounded by technology like this brings an expectation for the ability to extend the convenience mobility at this scale brings into the workplace too.

It is only a matter of time before the advent of HTML5 will make BYOD, and with it, the widespread adoption of mobile EAM solutions a daily reality.