‘Santa and the Grinch’ call off £1.3bn industrial takeover deal

Cambridge-based Aveva said £1.3bn reverse takeover by Schneider Electric was now too risky

Richard Longdon tried to reassure investors after the decision, but shares in Aveva slumped 28%

One of the biggest UK takeover deals of the year has been called off after the punishing squeeze on oil prices forced the bosses of the two companies to torpedo the tie-up.

The Cambridge-based engineering software firm Aveva said a complex, £1.3bn reverse takeover by the French firm Schneider Electric, announced in July, was now too risky and costly to benefit shareholders.

The decision was made yesterday by Aveva’s chief executive Richard Longdon and his counterpart at Schneider, Jean-Pascal Tricoire, after a gradual erosion of confidence since due diligence began six months ago.

Despite a private round of diplomacy by Mr Longdon yesterday, shareholders dumped the stock, sending it down 28 per cent or 616p to 1,550p. Schneider shares rose 1.1 per cent or 58 cents to €53 in Paris.

Aveva investors, which include Aberdeen Asset Management, Standard Life and Columbia Threadneedle, had been in line for an extra £10 per share after the takeover, but City analysts had questioned the logic of the deal due to its complexity.

The tie-up involved the FTSE 250 company issuing 74 million new shares to Schneider, giving the French firm a 53.5 per cent stake. In return, Aveva would have got £550m and control of Invensys – the UK software firm owned by Schneider.

“It was like partnering Santa Claus with the Grinch,” said George O’Connor at Panmure Gordon. “It’s good Aveva has stepped away.”

Aveva generates 40 per cent of its revenues from the oil and gas industry and has been hit by price declines in the sector. The collapse in the oil price has also put pressure on the planned £35bn takeover of BG Group by Shell.

Last month Aveva revealed an unexpected £800,000 loss last month for the first half of this year, further shaking confidence in the company.

The terms of the transaction with Schneider were non-binding and as a result no break fees will be payable by either party.

The deal was revealed unusually early – before due diligence had begun – in order to ward off rival suitors for Aveva, which were said to include Siemens.

Other large merger and acquisition deals have been cancelled this year, with Zurich calling time on its plan for a £5.6bn takeover of rival RSA Insurance in September. Despite this, deal making across the world has reached a record this year at $4.3trn (£2.8trn), according to Dealogic, led higher by activity in the pharmaceutical sector.