A top-five investor in Aveva plans to reject Schneider Electric’s “highly opportunistic” takeover of the software developer because the £9.5bn offer price fails to take into account its future potential.
Hedge fund Davidson Kempner, which has built a 3.8 per cent stake in Aveva, said in a statement on Thursday that it has “deep concerns” about both the deal and how the company’s board is handling the process.
Schneider said on September 21 that it would pay £31 a share for the 40 per cent of Aveva it did not own — a 41 per cent premium over the company’s closing share price in August, before the potential offer emerged.
When the deal was announced, top traditional long-only shareholders in Aveva, including Canada-based Mawer Investment management and M&G Investments, said they planned to reject it because it was an opportunistic bid trying to take advantage of recent weakness in the share price.
The takeover is due to be voted on by shareholders next week. Schneider, which aims to close the deal in the first quarter of 2023, will need to secure support from at least 75 per cent of minority shareholders.
Given the French group cannot vote, it would only take about 10 per cent of the overall shareholder base to reject it for the deal to be blocked.
Aveva is one of Britain’s oldest technology companies. Spun out of Cambridge university in the 1960s, its software has focused primarily on the energy, infrastructure and manufacturing sectors — areas Schneider also covers — although it has expanded beyond that.
The company is navigating a shift to rely more on subscription revenue, which analysts say could be challenging and take several years, but investors believe will be beneficial longer term.
Davidson Kempner said Aveva’s chief executive Peter Herweck, who joined 18 months ago on secondment from Schneider, has “presided over poor communication of the business model transition”.
Schneider said last month it was still pursuing a full takeover of Aveva, but added that it could also decide to maintain its 59 per cent ownership. “This is not an absolute must-do deal for us,” said chief financial officer Hilary Maxon on an earnings call.
At the moment the deal is a scheme of arrangement, a court-approved agreement between Schneider and Aveva’s shareholders.
However Schneider could switch to an offer to get the deal done, which would involve buying Aveva’s shares directly from the market without approval from Aveva’s board.
An offer is easier to pass because it only requires the majority of minority shareholders to accept it, compared with 75 per cent needed in a scheme of arrangement.
Davidson Kempner said that in the case of an offer, Aveva chair Philip Aiken and the board need to increase the price “to deliver extra value from that switch.”
It called on Aiken to defend “the interests of minority shareholders”.
The hedge fund said the takeover is “highly opportunistic . . . if it were to succeed it would represent a significant blow to the listed UK technology sector”.