The level of publicly declared opposition to the effort by French giant Schneider to buy out the minority shareholders in the UK software innovator Aveva is unusual.
In spite of owning 59 per cent of the stock, Schneider, advised by Citi, has struggled to get an offer which values Aveva at just under £10billion over the line.
The French company recognised early on the value of the Cambridge-developed manufacturing software written by Aveva and injected some of its own technology into the business and supported the takeover by Aveva of US competitor Osisoft.
Thwarted: In spite of owning 59% of the stock, Schneider, advised by Citi, has struggled to get an offer which values Aveva at just under £10bn over the line
There is an enormous difference between being a free-standing FTSE 100 company, with an independent board and governance, and being the fully owned subsidiary of a French electrical conglomerate Aveva operates an open architecture for its software (similarly to Arm Holdings) and the offer document indicates that this, and continued investment in R&D, will continue.
We live, however, in turbulent times and such commitments during a global downturn are hard to enforce.
Schneider may have effective control of Aveva but it is not in command. All the evidence suggests that however critical an overseas offshoot of a foreign-owned company may be, when push comes to shove and costs have to be shaved a British subsidiary is going to be more vulnerable to cuts than the domestic company.
This is especially true of France which has put up such high protectionist barriers around its own key industries.
At a time when Chancellor Jeremy Hunt is touting Britain as the ‘world’s next Silicon Valley’, it is hard to see that happening when the UK so easily disposes of its crown jewels.
Again, this is especially true for Aveva, in that its software could be vital in driving the renewables agenda at home and overseas.
A government which kicked Huawei off sensitive parts of the telecoms network and is seeking to unwind the takeover of Newport Wafer Fab by a Chinese-controlled entity should not feel comfortable about the technology transfer that could occur under the new ownership structure.
It used to be the case that when shareholders have spoken there is no turning back. This is no longer true. In spite of undertakings made by US satellite firm Viasat not to defenestrate its British rival Inmarsat, the deal has ended up with a Competition & Markets Authority probe.
Intervention came too late to save a raft of mid-ranking innovative UK companies, including Cobham and Ultra Electronics, from thorough scrutiny.
Aveva is an important test case for the National Security & Investment Act. It should not be seen as a ‘tidy-up’ by Schneider and allowed to sneak under the radar.
Sacre bleu!
A good example of Anglo-French cohabitation is do-it-yourself champions Kingfisher. The owner of B&Q and Screwfix in the UK and Castorama and Brico across the channel is a retailer for all seasons.
In the pandemic it was embraced by the WFH masses. Chinese-schooled chief executive Thierry Garnier was quick to embrace online.
After a post-Covid dip, it is benefiting from the energy fallout of war in Ukraine. Loft insulation sales are up 108 per cent year-on-year and Screwfix is doing a roaring trade in thermostatic radiator valves, anticipating the Chancellor’s effort to get people to slash energy bills by 15 per cent.
After the Covid boom Kingfisher shares have taken a beating and the upper end of the 2022 profit forecast has been trimmed to £760million from £770million. This is down from pandemic peak profits of close to £1billion.
There is plenty of life yet in DIY and France is the next stop for Screwfix.
Shameless
Out of the blue, an unsolicited email from Schroders arrives, extolling the virtues of the UK Public Private Trust.
With the share price at 15.3p, the shares are selling at a chunky 50.5 per cent discount to asset value. As a holder, I would love to see the discount closed.
But I cannot erase my disgust that in its previous incarnation – as Woodford Patient Capital – the trust was stuffed by Neil Woodford with holdings from his now-liquidated main Equity Income fund as he desperately sought to conform to regulatory requirements.
More than three years on, the Financial Conduct Authority has still to tell us what went wrong and who should take the blame.
