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Schneider’s power surge after US$6.1bn APC deal

French giant builds up power protection portfolio

FRENCH ELECTRICAL equipment group Schneider Electric is acquiring American Power Conversion (APC) for around US$6.1 billion.

The deal combines Schneider’s business in electrical distribution, industrial control and automation projects with APC’s core business of providing uninterruptible power supply (UPS) systems for data centres and production facilities.

Schneider already has a strong presence in the intelligent power protection space through its subsidiary MGE UPS Systems.

The acquisition is expected to result in significant value creation in excess of US$3 billion from the turnaround in large UPS systems, similarities with MGE UPS Systems and synergies with Schneider’s product offerings. It is also expected to generate cost synergies of around US$220million in areas such as purchasing, research and development (R&D) support functions and sales and services. The firm said 700% of savings will be achieved by 2009. The merger is expected to close early next year.

Jean-Pascal Tricoire, CEO of Schneider, added that the acquisition was a “significant” strategic move for the company.

“It allows us to greatly strengthen Schneider Electric in the fastest growing segment of our core business: electrical distribution,” Tricoire said.

“We expect this transaction to generate significant value by leveraging the unique complementary strength of the two companies,” he added.

APC made approximately US$2 billion in sales in 2005 and has enjoyed 12 consecutive quarters of double-digit sales growth. APC has 52% of its sales in the US, 30% in Europe and 18% in Asia where it has a strong manufacturing base.

APC’s operating margin — 9.4% in 2005 — had been negatively impacted by the significant investment required to keep up with its strong growth in the large UPS market.

Through MGE UPS Systems, Schneider said it was confident it could rapidly improve upon APC’s profitability.

Rob Johnson, president and CEO of APC, said that the deal provided excellent value for shareholders. “Both companies have a dedication to innovation and customer service that would make our combined enterprise an even stronger, more competitive player in the industry,” he stated.

It is not yet clear how the acquisition will affect APC’s regional operation and APC Middle East said it had no comment to make at this time.

Only last month APC announced it had revamped its regional set-up to improve its support infrastructure in the Middle East. The overhaul is meant to provide the foundation for the company’s expansion in the region, with Dubai poised to become a focus of major investments in the coming months.

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