FTSE-250 software group Aveva to unveil £3bn Schneider merger

Aveva, the FTSE-250 engineering software group, will this week unveil a £3bn-plus merger with the software arm of France’s Schneider Electric (EUREX: SND1.EX - news) – consummating a courtship that began in 2015.

Sky News can reveal that Aveva and Schneider Electric are expected to announce on Tuesday that they have reached agreement on a deal to create one of the UK's biggest listed software companies.

Aveva's board is understood to be recommending the deal to its shareholders.

Insiders said the transaction would be structured identically to a June 2016 effort to combine the two companies, with Schneider Electric being issued shares in its British peer.

The tie-up will effectively constitute a reverse takeover of Aveva, which makes specialist software for complex processes in the oil and gas industries.

Aveva's shareholders will receive more than 800p-per-share in cash as part of the deal, according to one source, with Schneider Electric holding a majority stake in the enlarged group.

Sources added that Aveva would remain headquartered in Cambridge and listed on the London Stock Exchange (Other OTC: LDNXF - news) .

Aveva's management is expected to hail the merger as positive news for UK plc at a time when Brexit and a string of foreign takeovers of British companies have sparked concerns about a 'brain drain' of British technology jobs.

Those fears were stoked by ARM Holdings (LSE: ARM.L - news) ' £24bn takeover by Japan's Softbank (Swiss: SOFB.SW - news) last year, despite the acquirer's legally binding pledge to maintain jobs and research spending in the UK.

Imagination Technologies (Other OTC: IGNMF - news) , the microchip manufacturer rocked by Apple (NasdaqGS: AAPL - news) 's decision to terminate their relationship, is in talks about a takeover by an investment fund backed by the Chinese state.

The retention of its Cambridge base is symbolically important, since Aveva's technology was developed and spun out of the city's university exactly half a century ago.

Schneider has attempted to combine its software business with Aveva on two previous occasions.

In 2015, months of talks ended with Aveva citing "significant integration challenges…that could not be overcome without considerable additional risk and cost".

By contrast, a resuscitated attempt to strike a deal last year was aborted just three days after confirmation that they were back in discussions.

Schneider's renewed courtship of Aveva may surprise City analysts following the French company's $1.25bn cash purchase of Asco, a US-based maker of power-switches, in July.

The deal will also herald the return of Invensys, part of which comprised a major industrial software business, to the London stock market.

Schneider Electric bought Invensys in a £3.4bn deal in 2014 - notable also for the role played by Sir Nigel Rudd, the boardroom veteran who chaired the London-listed company.

Shares (Berlin: DI6.BE - news) in Aveva, which refused to comment, closed down just over 1% on Monday.

At their closing price of 1918p, the company has a market value of £1.24bn.

The London-listed company is being advised by Lazard (Frankfurt: A0DQP8 - news) , with bankers at Morgan Stanley (Xetra: 885836 - news) advising Schneider.

The French company has a market value of almost €41bn.