Invensys on the bidding block

Over the past several years I have predicted, and despite the nay-sayers kept continuing to predict that Invensys would be sold off sooner or later. Now it's happening.

Here's a brief sequence of events:

UK-based Siebe and BTR merged to form Invensys. CEO Allen Yurko, who orchestrated the ill-fated combination, put the company into a tail-span and was booted out. The next CEO, Rick Haythornthwaite, was clueless and fizzled, handing over to 'hired-gun' Ulf Henricksson.

Ulf caused chaos in the process automation group by hiring an ex-EDC manager, who foolishly transferred the HQ of crown-jewel Foxboro to Dallas, Texas and was then fired with no explanation.

This resulted in Ulf himself leaving not long after. Invensys shares fell to rock bottom at 215 pence (A$3.57); the company was worth £1.7 billion (A$2.8 billion).

The debacle of several unstable management transitions brought a new Board of Directors, with Sir Nigel Rudd as Chairman and financial director, Wayne Edmunds, as CEO. Clearly Invensys was being financially tailored for sale.

I predicted, and kept predicting, that Invensys could not survive independently and would inevitably be sold off sooner or later.

But a succession of new managers soldiered on bravely. The shuffling continued, with the financially oriented CEO focused on minimising the impact of the under-funded pension-plan and selling off pieces unrelated to the core industrial controls business.

The rail division was sold off to Siemens last year for £1.74 billion (A$2.9 billion), more than the total value of all of Invensys. This allowed the sorting out of the pension deficit and return 77 pence (A$1.28) per share to shareholders, getting the market to finally revalue the business

This left the crown-jewels, Foxboro and Wonderware, as acquisition bait with increased value of the grossly depressed stock. C'mon now, clearly the end result was inevitable.

This past week – mid July – Invensys "breaks" the news that Schneider Electric made an offer of £3.3 billion (A$5.5 billion). Under UK takeover rules they have a deadline of August 10 to confirm or walk away.

Invensys solicited Schneider, whose response to the news implied that they did not appreciate the premature announcement.

Clearly, the Invensys board was trying to provoke a bidding war with the other possible contenders: Emerson, Siemens, ABB, and GE.

The bidding is unlikely to start until just before or after Schneider makes its formal offer. It's doubtful that Schneider wants most of the company.

Gary Mintchell, now running his own, independent new business blog, TheManufacturingConnection.com, commented: "Schneider's record of integrating acquired companies is less than stellar. It buried Citect.
What would it do with Wonderware? Their release said the company wanted a foothold in the industrial market, but Schneider does not promote automation. It promotes energy. Will that change?"

Emerson may enter the bidding. CEO David Farr did say last year that they considered buying Invensys on and off for 15 years and would continue to look at its process automation business.

Emerson does not want software; they want Foxboro's customer list – and one less competitor. They will wait for the announcement of Schneider's offer before deciding whether or not to counter.

They could sell off the appliance unit to Schneider, which would help pay for the acquisition; this is probably the better option for the Invensys employees.

GE, now focused on their long-term objective, the Industrial Internet, quickly declined. Others are waiting and watching.

The question remains: If Invensys is sold, who wins? Shareholders, buyers, investment bankers. But, what about the customers?

Check out Gary Mintchell's analysis.

[Jim Pinto is an industry analyst and commentator. The views expressed in this column are his own.]

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