France’s Schneider Electric is to buy British engineer Invensys for an agreed £3.4 billion ($5.2 billion) to strengthen its high-margin industrial automation business and win more custom in the fast-growing energy sector.

Schneider said yesterday it would pay 502 pence a share in cash and stock, 14 per cent above Invensys’ closing price the day before talks between the two firms were disclosed.

That is just below an initial proposal of 505 pence a share after other bidders failed to emerge, although the cash component is higher, at 372 pence, than the original 319 pence.

The deal, Schneider’s biggest since its $6.1 billion purchase of American Power Conversion Corp in 2006, will combine Invensys’ automation software that helps run power stations, oil refineries and chemical plants with Schneider’s automation products for the car, aerospace, food and beverage industries.

It will bolster the French group against larger players such as Switzerland’s ABB and Germany’s Siemens and give it the opportunity to cross-sell its energy efficiency products to Invensys’ high energy-using customers.

Schneider, which has been hit by a faltering world economy and a weak Europe in particular, forecast the deal would deliver €140 million of cost savings a year by 2016 and about €400 million of additional revenues a year by 2018.

Chief financial officer Emmanuel Babeau told reporters it would review the future of Invensys’ appliance unit, which makes controls for washing machines, suggesting it could be sold.

At 10.20 GMT, Schneider’s shares were up 4.1 per cent at €60.37, while Invensys’ were up 2 per cent at 501 pence.

The British firm has long been touted as a takeover target in an industry dominated by larger rivals and some analysts had speculated Schneider’s interest could prompt rival bids from firms such as Emerson and General Electric. – Reuters