Invensys takes over Baan but falls short of target

Invensys, the engineering and software company, yesterday said it has taken control of Baan in a deal that values the unprofitable Dutch software maker at 762m euros, despite earlier indications that the deal would be abandoned.

Invensys, the engineering and software company, yesterday said it has taken control of Baan in a deal that values the unprofitable Dutch software maker at 762m euros, despite earlier indications that the deal would be abandoned.

The move came after a second deadline for Baan shareholders to tender their shares to Invensys lapsed on Tuesday. Invensys, which said in May it wanted to buy Baan, had said it wanted to gain control of 95 per cent of shares before it agreed to buy the company at 2.85 euros a share. This would have enabled Invensys to delist Baan from the Amsterdam exchange.

But yesterday, after a group of private shareholders who claim to own nearly 20 per cent of Baan continued to refuse to tender the bulk of their shares, Invensys said it would go ahead with the backing of only 75 per cent of shareholders. A holding agreement is in place until Baan shareholders formally vote the deal through at a meeting next month, when a majority must back the proposal.

This is expected to be little more than a formality as Invensys owns 25 per cent of the company's shares, with a further 50 per cent tendered by shareholders. The remaining shareholders can still opt to back the deal between now and the meeting. Allen Yurko, chief executive of Invensys, said: "It was a disappointment that we did not get 95 per cent and we did seriously consider the possibility of walking away from the deal. But there would have been a meltdown if we had not closed the deal." Baan said yesterday it is losing $1m a day and, if yesterday's deal had not been brokered, would have been forced to apply for bankruptcy within the next few weeks. Mr Yurko said he expects Baan to be back in profit by June next year following an "immediate and comprehensive" overhaul.

This will involve slashing 1,000 jobs - from Baan and Invensys staff - and the creation of a major new software and solutions department from both companies' staff. Invensys has also stumped up a 100m euros loan to tide Baan over in the short term. Under the terms of the deal, the Baan board and management team will remain in place until its shareholder meeting but, Mr Yurko said, after that there will be more significant management changes.

Not all investors in the City were convinced that Invensys, which has under-performed its sector by 40 per cent this year, would turn Baan around as quickly as Mr Yurko pledged. Shares in the company fell 3.75p to 236.5p yesterday.