A top-10 investor in Aveva plans to reject Schneider Electric’s £9.5bn takeover of the software developer on the grounds that it represents an “opportunistic bid” that undervalues the UK group.
Schneider said on Wednesday that it would pay £31 a share for the 40 percent of Aveva it did not already own — a 41 percent premium over the company’s closing share price in August, before the potential offer emerged.
Peter Lampert, a portfolio manager at Canada-based Mawer Investment management, which has C$77bn in assets under management and is one of the top five external shareholders in Aveva, said the offer price did not reflect the long-term potential of the company .
“Aveva is a great business with a very promising long-term outlook,” he said. “It’s an opportunistic bid taking advantage of share price weakness in recent months.”
Schneider’s takeover attempt is the latest example of an undervalued UK company being snapped up by a foreign buyer or removed from the stock market by private equity.
Lambert’s views echo those of M&G Investments, another Aveva shareholder that said on Wednesday it opposed the terms of the deal and planned to vote against them.
Spun out of Cambridge university in the 1960s, Aveva is one of Britain’s oldest technology companies. Its software has focused primarily on the energy, infrastructure and manufacturing sectors — areas Schneider also covers — although it has expanded beyond that.
Aveva issued a profit warning in April, saying competition for engineering staff and the need to invest more in cloud computing would push down its margins. The company is also navigating a shift to rely more on subscription revenue, which analysts say could be challenging and take several years.
Schneider aims to close the deal in the first quarter of 2023, but will need to secure support from at least 75 percent of minority shareholders in a vote set for mid-November. Given the French group cannot vote, it would only take about 10 percent of the overall shareholder base to reject it for the deal to be blocked.
Schneider has said he believes the price he has offered is fair and reflects the challenging economic environment affecting software companies.
The board of Aveva has also recommended the offer after receiving advice from Lazard, JPMorgan Cazenove and Numis. “We believe that the acquisition represents attractive, certain cash value,” said chair Philip Aiken.
Mawer is a long-only equity investor that looks to buy positions in strong businesses and hold them for at least a decade.
Lampert said he could consider a revised offer for Aveva “in the higher thirties” but “otherwise I’m inclined to vote against the deal.” He added: “It has a great outlook. We take a 10-year view and I’m willing to be patient. . .[as Aveva changes its business model] the economics and profitability will become more apparent and value will be more fully reflected in the stock price.”
Rory Alexander, UK equity fund manager at M&G, said Aveva’s share price was “trading at depressed levels due to the combination of low technology valuations, macroeconomic uncertainties and a complex business model evolution from license to subscription based revenues”.
Another top-20 investor said the bid “materially understates the true long-term value of the business”, especially as Aveva had a significant role helping companies to become greener, a growth area.
Berenberg analysts wrote in a note that the bid was lower than the £32-£37 per share they had expected and the “valuation does not fully reflect Aveva’s true potential”. But they predicted shareholders would be tempted to support the deal given their “fatigue resulting from a material derating of the share price” and the challenges Aveva faced.
Jefferies also expected the deal would go through, saying Schneider was “the only possible buyer given it is already the majority shareholder.”
Schneider declined to comment. Aveva did not return a request for comment.