Threat to UK tech ambition: Aveva deal is important test case for national security and investment law, says ALEX BRUMMER
The level of publicly stated opposition to French giant Schneider’s effort to buy out minority shareholders of British software innovator Aveva is unusual.
Despite owning 59% of the shares, Schneider, advised by Citi, struggled to secure an offer that values Aveva at just under £10bn.
The French company recognized the value of manufacturing software developed by Cambridge and written by Aveva early on and injected some of its own technology into the business and backed Aveva’s takeover of US competitor Osisoft.
Thwarted: Despite owning 59% of the shares, Schneider, advised by Citi, struggled to secure an offer that values Aveva at just under £10bn across the board
There’s a huge difference between being an independent FTSE 100 company, with an independent board and governance, and being a wholly-owned subsidiary of a French electrical conglomerate Aveva operates an open architecture for its software (like Arm Holdings) and the offer indicates that this, along with continued investment in R&D, will continue.
However, we live in turbulent times and such commitments in a global downturn are difficult to enforce.
Schneider may have effective control of Aveva, but he is not its commander. All the evidence suggests that, however critical an overseas subsidiary of a foreign company may be, when pressures mount and costs need to be cut, a UK subsidiary will be more vulnerable to cuts than the domestic company. .
This is particularly 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’s hard to imagine that happening when the UK is so easily getting rid of its crown jewels.
Again, this is especially true for Aveva, as its software could be vital in advancing the renewable energy agenda at home and abroad.
A government that has expelled Huawei from sensitive parts of the telecommunications network and is seeking to unwind the takeover of Newport Wafer Fab by a Chinese-controlled entity should not feel comfortable about the transfer of technology that could take place under of the new ownership structure.
Previously, when shareholders spoke, there was no turning back. This is no longer true. Despite the commitments made by the American satellite company Viasat not to defenestrate its British rival Inmarsat, the case ended in an investigation by the Competition & Markets Authority.
The intervention came too late to save a series of innovative mid-tier British firms, including Cobham and Ultra Electronics, from scrutiny.
Aveva is an important test case for national security and investment law. This shouldn’t be considered “tidying up” by Schneider and allowed to sneak under the radar.
Damn it !
A good example of Anglo-French cohabitation is the do-it-yourself champion Kingfisher. The owner of B&Q and Screwfix in the UK and Castorama et Brico across the Channel is a retailer for all seasons.
During the pandemic, it was embraced by the WFH masses. Chinese-trained CEO Thierry Garnier was quick to embrace online technology.
After a post-Covid plunge, it is benefiting from the energy fallout from the war in Ukraine. Sales of loft insulation are up 108% year-on-year and Screwfix is doing a blistering trade in thermostatic radiator valves, anticipating the chancellor’s push to get people to cut their energy bills by 15%.
After the Covid boom, Kingfisher shares took a beating and the upper end of the 2022 profit forecast was cut to £760m from £770m. This is down from pandemic peak profits of nearly £1billion.
There is still a lot of life in DIY and France is the next step for Screwfix.
Out of the blue, an unsolicited email from Schroders arrives, touting the UK Public Private Trust.
With the share price at 15.3 pence, the shares are selling at a significant discount of 50.5% to the value of the asset. As a licensee, I would like to see the shed closed.
But I can’t erase my disgust that in its previous incarnation – as Woodford Patient Capital – the trust was stuffed by Neil Woodford with holdings of his main, now liquidated, Equity Income fund as he desperately sought to comply with regulatory requirements.
More than three years later, the Financial Conduct Authority has yet to tell us what went wrong and who should bear the blame.