Schneider Electric Buys Telvent for $2 Billion

French power equipment company Schneider Electric (SU.PA) is buying smart grid company Telvent (Nasdaq: TLVT) for roughly $2 billion to strengthen its portfolio in the growing smart grid sector. 

This is the second billion-dollar deal in as many weaks, marking a consolidation in the smart grid sector. Last week Toshiba confirmed its purchase of smart meter company Landis+Gyr for $2.3 billion.

Telvent’s software allows real-time management of critical infrastructure in many industries: electricity, agriculture, oil & gas, water and transportation. The company is based in Madrid, Spain.

Schneider will integrate Telvent’s software platform into its own platform to offer a comprehensive service that provides operation management for efficient infrastructures. It will also double Schneider’s overall software development competencies and enhance its IT integration and software service capability, including weather services.

"The acquisition is in line with our ambition to become a complete solution provider for our customers," says CEO Jean-Pascal Tricoire.

In March, Schneider purchased US-based Summit Energy Services. In December 2010, the company purchased two French software developers focused on building management. And in September 2010, the company partnered with Verisae to bring a Demand Response (DR) product to commercial and industrial customers in the US and overseas markets.

Schneider made a cash tender offer for all of Telvent’s shares at a price of $40 per share, a premium of 36% to Telvent’s average share price over the last 3 months.

Abengoa SA (ABG.MC), which has a 40% stake in Telvent, will sell its shares to Schneider. Telvent’s board has has approved the transaction and it’s expected to close in Q3 2011.

Schneider says it will now be able to offer electric utility customers complete substation automation and a smart grid software suite: DMS (Distribution Management System), OMS (Outage Management System), SCADA (Supervisory Control And Data Acquisition), MDM (Meter Data Management), GIS (Geographical Information System).

For water and oil & gas operators, the company will add an information management solution to monitor and optimize their networks.

For large operators of transportation infrastructure and municipalities, Telvent provides an integrated suite of solutions that combine information and intelligent transport systems and services to improve efficiency of existing infrastructure. "This ability to manage extensive and flow-based networks in cities will be a major contribution to our offers for the Smart Cities," Schneider Electric said in a release.

The complementary geographical strength of the two companies should lead to significant synergies. Schneider can build on Telvent’s strong presence in North America and Latin America, and Telvent will be able to enter the Asia-Pacific, Middle East, and Russia, while expanding their presence in Western Europe.

Telvent employs over 6,000 people and operates in more than 19 countries. It reported 2010 sales of approximately EUR 753 million and adjusted EBITDA of EUR 115 million.

Its key markets are Europe (42% of 2010 sales), North America (35%) and Latin America (16%). Its presence in the other regions of the world is more limited (7% of 2010 sales) but growing. Its five operating segments are: Energy (34% of sales), Transportation (28%), Environment (8%), Global Services (19%) and Agriculture (11%)

Schneider expects the transaction to generate synergies of EUR 250-300 million by 2016 thanks to enlarged offerings, complementary customer bases and wider geographical exposure.

The full potential impact of revenue and cost synergies on EBITA is estimated to reach EUR 50-60 million by 2016, of which two thirds should be achieved by 2014.