Aveva plunges after Schneider Electric walks away from takeover talks

Aveva Group and French suitor Schneider Electric have terminated takeover talks after the pair were unable to reach agreement.

The engineering software group said that during the due diligence process, the two companies identified "significant integration challenges" that they did not feel could be overcome without considerable additional risk and cost.

Aveva had previously commented that Schneider Electric and Schneider Software shared backoffice and property resources, and that separating these would be no small task.

As a result, it was decided that the combination would be unlikely to deliver the anticipated uplift in shareholder value.

Aveva, which is not due to receive any compensation 'break fees' for the ending of the talks, added that trading has continued in line with management expectations and the outlook for the full year remained unchanged.

Broker Numis suggested that, unlike a traditional M&A deal where one party assumes all risk and responsibility, the bipartite structure of the deal increased the complexity and challenges of reaching an efficient agreement.

"We also think that with a volatile market backdrop, management needed to be able to sustain their well-regarded customer focus rather than diverting all their efforts to integration."

Analysts acknowledged that while the news will be disappointing to shareholders, "management would not be walking away from this deal - and the potential cash payment to shareholders - unless they saw significant risk that it was financially and strategically dilutive for the remaining equity".

Investors should expect the shares to be volatile, Investec said, but further M&A possibilities could lend some support in the coming weeks.

Before Aveva and Schneider engaged in exclusive talks, there were reports of interest in the UK company from multiple sources, including US companies GE and Emerson.

"Considering the widespread media speculation of an approach before the Schneider deal was proposed, we imagine there will be hopes that another suitor will step forward," said Investec. "Aveva is a quality asset, but one where trading is under pressure, so while this cannot be ruled out, we do not see it as a foregone conclusion and would not recommend investing in the stock solely on this premise."

Shares in Aveva plunged 36.4% to 1,377p by 0855 GMT on Tuesday, back to levels not seen since February.