AVEVA to buy industrial software firm OSIsoft in $5 Billion deal
AVEVA Group Plc, the British industrial software firm, has agreed to buy OSIsoft in a deal that gives the California-based company an enterprise value of $5 billion.
The acquisition is expected to be funded as follows:
· $3.5 billion in cash as a capital raise. Schneider Electric (major shareholder) has irrevocably committed to vote in favor of the acquisition and fully subscribe to the capital raise.
· $0.9 billion from existing cash on the balance sheet and new debt facilities
· $0.6 billion in ordinary sales to OSIsoft founder
OSI will be integrated as a business unit within the combined group. OSIsoft's founder, Dr. J. Patrick Kennedy, will remain involved in the business through his appointment to the newly established (non-Board) role of Chairman Emeritus in order to support the delivery of the full strategic, operational and financial benefits of the acquisition.
The deal would create a company with annual revenue of around £1.2 billion and adjusted earnings before interest and taxes of £330 million, AVEVA said.
Why OSI Soft?
We believe revenue synergies mainly justify the operation. The vast install base and brand recognition of OSIsoft will be used by AVEVA to explore upselling opportunities for the AVEVA in accounts where competitors are currently better positioned.
If we look at the high-level segmentation, we can quickly realize that the acquisition should allow AVEVA to strengthen its position in Chemicals, food and beverage, life sciences, and pharma, reducing its dependency to the "Oil and Gas" segment.
If we look at the acquisition from Schneider Electric's perspective, you can see the value more clearly. The PI system acting as a data shepherd between the OT and the IT domain is expected to play a critical role within the EcoStruxure value proposition across process, hybrid, building, data centers, and infrastructure sectors.
OSIsoft's founder Pat Kennedy, till months ago committed to staying independent, started looking for join forces with a company able to act as a strong foundation for the organization's future.[WA3]
Why? We believe that the risk of becoming a commodity service was too high. To still become relevant had to look for a "home" with strong leadership and a holistic approach to the industrial ecosystem.
OSIsoft found in AVEVA and Schneider Electric a shared mission to support its customers' vision.
The combination of the two entities will extend the OSIsoft value proposition outside the process historian domain for the served industries. It will also create opportunities in buildings and infrastructure, leveraging Schneider Electric installed base.
Over the last few months, SoftBank Group's Vision Fund was looking at selling its 44.7% stake in OSIsoft, such a desire to monetize from the 2017 investment pushed the owner to accelerate the search for the right business partner. Even in such a challenging time, its full of opportunities for industrial software companies.
What the combined portfolio brings to the industry
OSIsoft PI, the most widely used data historian, will be positioned at the core of an IIoT comprehensive portfolio with the clear objective of connecting design and construction to operations in mission-critical environments.
The shared customer base will be used as a reference with the other potential customers and as a preferred playground to introduce the evolution of the combined offer. The Complementary customer base will be the one generating substantial cross-sell opportunities for both AVEVA and OSIsoft products.
The combined portfolio will reduce AVEVA exposure to the "Oil and Gas" segment, which should move from 40% to less than 35%.
Unlike strategic partnerships, acquisitions hide additional challenges in how top management would deal with the blending of the company culture. The role of Pat Kennedy, if properly empowered, is going to be key here.
How is this agreement going to impact the industrial ecosystem?
How solution vendors who rely on the PI system to complete their value proposition are going to react to such an acquisition?
Even if OSIsoft continues to be an open platform, the sales teams would be challenged by AVEVA and Schneider Electric sales with their competitive advantage as "owners" of the core data platform.
It is going to be extremely interesting to monitor the evolution of the different strategic alliances and how their impact will be perceived across the different industries.
It would also be interesting if and how the evolution of the entire AVEVA portfolio is going to fully rely on the OSIsoft team experience in mastering the brownfield OT systems and how they will be able to focus on supporting end-to-end Digital Twin use cases.