Schneider said to mull bid for Tyco

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Tuesday, April 12, 2011

PARIS—Schneider Electric, based here, is working with bankers to assess a bid for Tyco International, according to an April 11 Bloomberg report, which cited “three people with knowledge of the matter.”

Tyco spokesman Paul Fitzhenry declined comment, and a spokesperson for Schneider Electric on April 13 issued a statement saying it is not currenlty in talks with Tyco regarding a potential strategic transaction between the two companies.

The deal is in the early stages and is not imminent, according to the report.

Schneider, a $46 billion company, is considered the world’s largest maker of circuit breakers. It’s also known for industrial automation, energy management systems and security offerings. Its competitors include Seimens of Germany and ABB of Switzerland.

Tyco is the parent company of ADT and SimplexGrinnell. It also runs a flow control business, which makes industrial valves and controls, water and environmental systems, and thermal control solutions. Tyco International separated into three separately traded companies in 2007, and has a market cap of about $23 billion.

Should the deal come to fruition, Schneider would be the world’s biggest manufacturer of security systems and this deal would rank as the biggest industrial takeover on record by a European company, according to Bloomberg.

Niall Jenkikns of iMS Research told Security Systems News:“Although Schneider Electric have denied they are currently in talks with Tyco, if the acquisition was to happen it would create the world’s biggest video surveillance equipment vendor. Additionally, it could also be complimentary for the systems integration businesses, with Schneider Electric focused on the enterprise market and ADT, the Tyco subsidiary, primarily focused on the retail and commercial markets.”

The deal faces some obstacles, according to analysts, including the assumption that Schneider would need to secure equity and debt financing to purchase Tyco, which could command as much as $32 billion, according to a note issued by Carol Levenson of Gimme Credit, and reported by Bloomberg.

“We doubt that Tyco, wishing to remain independent, would go quietly, and a hostile bid would likely require a high premium and considerable cash,” Levenson wrote in the note.

Tyco stock gained 3 percent on news of the potential deal on April 11, while Schneider’s shares dropped roughly 3 percent.

Schneider bought Pelco in 2007. This year Schneider realigned key functions of the organization to bring Pelco and Schneider Electric operations in North America all under a common leadership. This realignment, “will allow us to better deliver security solutions, in addition to products,” Kevin McCaughey, VP security solutions, Schneider Electric Buildings Business, told Security Systems News in January.

Schneider bought building control and security provider TAC in 2003. TAC was rebranded as Schneider in the fall of 2009. (Previously TAC was known as Tour Andover Controls.)