UK-based industrial software company Aveva announced an agreement to buy SoftBank-backed OSIsoft at an enterprise value of $5 billion in a bid to help businesses run more efficiently and accelerate their digital shift.
Shares are currently rising 5.4% in London trading. As part of the agreement, Aveva (AVV) and US-based OSIsoft will combine their complementary product offerings, which is expected to result in “meaningful” cost synergies. The combination of the two companies will bring together industrial software and data management to help customers in industrial and organizations accelerate their digital transformational strategies as efficiency, flexibility, sustainability and resilience become increasingly urgent requirements for customers, Aveva said in a statement.
The acquisition will be funded by a combination of capital raised through a rights issue, cash on balance sheet, new debt facilities and the issuance of new ordinary shares to one of the selling shareholders.
The deal is forecast to be earnings accretive in Aveva’s financial year ending 31 March 2022, before synergies. It will create material cash tax savings over a 15-year period as a result of intangible assets created by the acquisition that can be amortised for tax purposes.
“Data has been enabling organizations to more effectively determine the cause of problems by allowing them to visualize what is happening in different locations, departments and systems,” Craig Hayman, CEO of AVEVA said. “The acquisition of OSIsoft is perfectly in line with our strategic vision and it will accelerate the Enlarged Group’s role in the digitisation of the industrial world, which is being driven by a need for sustainability, the industrial internet of things, Cloud, data visualisation and artificial intelligence.”
Aveva added that OSIsoft’s data management software will complement its end-to-end engineering, operations, and performance offerings. Integrating OSIsoft’s PI system into Aveva’s software portfolio will create an integrated data foundation that can drive big data, cloud and AI-driven insights for businesses. The PI system is a single system of record for operations data, designed for massive cloud-enabled scale and data sharing across enterprises, and enables insightful operations decision making.
In addition, the combined company will drive greater efficiencies and sustainability for many diverse essential industries, including consumer packaged goods (CPG), pharmaceutical, water and wastewater, and utilities, creating strengthened product offerings, it said in the statement.
With AVV shares now trading down a mere 1.8% this year after hitting a low in mid-March, analysts have a Hold consensus on the stock. (See AVV insider trading activity on TipRanks)
Meanwhile, the GBP4,196 average analyst price target indicates 8.2% downside potential to current levels.
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