23 Jul 2024


Will Invensys make £7m bid for Schneider Electric?

Recent rumours have suggested that the British controls and automation giant Invensys is preparing to make a £7.2m bid for the French electrical equipment group Schneider Electric.

Neither party has commented on the speculation, but some financial analysts have expressed doubts whether Schneider was the type of business that Invensys is targeting. Most of Invensys` recent acquisitions have been smaller organisations with a strong software bias.

The rumours emerged soon after Invensys had briefed analysts on its plans for the future. The company produced figures showing it lying in third position in the $130bn global automation and controls market (if process and building controls are included), with sales worth $11.3bn, just behind Siemens (on $11.6bn) and ABB ($11.4bn).

In the more specific industrial automation sector, Invensys lies in sixth position with sales of $1.7bn (in a market worth $42bn). If Invensys` 4% share of this market was combined with Schneider`s 11%, it would put Invensys ahead of the market-leaders Siemens (on 13%) and ABB (11.9%).

Invensys` chief executive Allen Yurko told the analysts that his aim is for the group to become the global leader in automation and control. It already leads in the process automation and residential control markets, he said.

Although Invenys is some way off pole position in industrial automation, Rick Armbrust, recently appointed chef executive of its Industrial Drives Systems (IDS) division, is optimistic.

“We are not as big as some of our competitors but, at $2bn, we have a good base for growth,” he told the analysts. The drives division, with sales last year of £1,188m and pre-tax profits of £143m, represents about 13% of Invensys` total business. It employs around 16,500 people worldwide and spans five sectors: industrial motors (including the Brook Crompton, Bill and Parvex brands); drives (Eurotherm); power transmission (Rexnord, Hansen and Link Belt); air systems (Compair, Hoffman and Watts); and airport baggage automation (BAE).

Power transmission accounts for more than half of the IDS business (51%) with motors and drives representing 21%. Just 14% of Invensys drives systems business is done in the UK; 43% is in North America.

Armbrust told the analysts of his plans to boost the performance of his division. These include expanding in areas, such as materials handling, where the IDS division is already strong. In terms of technology, he is aiming to cut the costs and improve the quality of the Invensys drives products.

Another strategy is for the various Invensys operations to work more closely with each other and to exploit each others strengths. Armbrust is also keen to promote sales via the Internet: “We will be there to grab it,” he promised.

But the drives division is also cutting costs. It is closing eight factories, including four in the UK (Bull, Blantyr, Honley and Maxam), three in the US, and one in Germany. Production is being moved to other plants, increasingly in low labour cost countries such China, Poland and India.

The number of layers of management is also being reduced. Armbrust revealed that these measures are already bearing fruit. “The profit improvement has already started,” he said.