Making of a UK tech giant: Aveva is Britain’s most valuable software firm after swoop on US rival
Aveva is poised to become Britain’s most valuable software company after it completed the £3.8billion takeover of an American rival.
The firm, which makes computer programmes used to design oil rigs (pictured below), ships and nuclear power stations, is buying data company Osisoft in a deal expected to boost its market value to more than £10billion.
That will propel it above Sage, the accountancy software firm that was worth £8.1billion yesterday.
Aveva said the takeover will allow it to benefit from the trend in manufacturing that has seen companies increasingly use software to track the performance of equipment and supply chains, to find ways to cut costs.
Osisoft specialises in collecting this type of data from mines, factories and other industrial sites using an array of sensors connected to the so-called ‘internet of things’.
It is the second major tie-up by Aveva in three years, after the company merged with French giant Schneider Electric in 2017.
Another winner from the deal will be Japan’s Softbank, which owns 45 per cent of Osisoft and now stands to make about £1.5billion.
Craig Hayman, the chief executive of Aveva, said: ‘The acquisition is perfectly in line with our strategic vision and it will accelerate the enlarged group’s role in the digitisation of the industrial world.’
He said the deal would also allow Aveva to ‘broaden and deepen’ relationships with its customers, providing an opportunity for it to sell them new services.
California-based Osisoft already caters to hundreds of the world’s biggest companies, including most of the top oil and gas firms, providing software to 14,000 sites in 127 countries.
It was founded in 1980 by Dr Patrick Kennedy and employs 1,400 people.
In an online advertisement, it asks: ‘How come your data isn’t performing incredible feats? How come you haven’t achieved digital transformation nirvana yet?’
The company promises to collect data and turn it into ‘insight’ for customers.
It reported that it made adjusted annual profits of £116m after revenues of £373m in its most recent financial year.
Its ownership is largely split between Kennedy and his family, who own just over 50 per cent of the shares, and Softbank, which has just under 45 per cent.
A third investor, Mitsui & Co, owns the remaining 5 per cent but will also sell this as part of the deal. Kennedy is being paid with shares in Aveva and will own about 4 per cent of the company after the takeover.
Aveva said it would also issue £2.7billion worth of new shares to help fund the transaction, with another £685m coming from its cash reserves and borrowing.
TRACK RECORD OF SUCCESS
Aveva makes software used to design oil rigs, ships and nuclear power stations.
It originated as the government-funded research institute known as CADCentre, established to promote computeraided design.
Privatised under Margaret Thatcher in 1983, in 1994 it was bought out by the management team, and listed on London’s stock exchange in 1996.
In 2017, it merged with French giant Schneider Electric which took a 60 per cent controlling stake. That doubled its size, securing it a place on Britain’s FTSE 100 index of blue chip firms. It was worth £7.5billion yesterday.
The company’s shares rose 7.3 per cent, or 314p, to 4646p after the announcement yesterday, taking its value to £7.5billion.
It has received the backing of Schneider, which owns 60 per cent of Aveva after the 2017 takeover and will also participate in the shares issue.
Softbank will gain a much-needed cash boost from the takeover, after coming under pressure to sell assets from activist investor Elliott. Billionaire founder and chief executive of Softbank Masayoshi Son has been forced to rein in his expansion plans after suffering losses from investments in an array of technology companies through the company’s $100billion (£76billion) ‘vision fund’.
The deal is expected to complete at the end of the year, with Osisoft then becoming a division of Aveva.
The deal met with approval from industry observers.
Analysts at Barclays commented: ‘We expect the market to like the deal.
‘Industrial software will continue to consolidate and this deal will move forward Aveva’s strategic ambitions, in our view.’
It comes after Aveva warned in April that its performance in the first half of this year would be hit by the global economic downturn which has been caused by the coronavirus pandemic.