UK's Aveva Group to buy OSIsoft for US$5 billion, including debt

Aveva Group Plc has agreed to buy Osisoft in a deal that gives the SoftBank Group Corp.-backed industrial software maker an enterprise value of $5 billion.
 

About $4.4 billion of the deal will be paid in cash, funded by the balance sheet and a $3.5 billion rights issue, Cambridge, England-based Aveva said in a statement on Tuesday. The remainder will be funded with debt. Osisoft is jointly owned by SoftBank’s Vision Fund and founder and Chief Executive Officer J. Patrick Kennedy’s family.
 

There are more deals to come as industrial companies shift toward software-based automation that helps factories and machinery run more efficiently, and Aveva is a prime candidate to play “a major part” in further consolidation, Chief Financial Officer James Kidd said in an interview.
 

Aveva beat out several other industrial bidders for San Leandro, California-based Osisoft, including Emerson Electric Co., Bloomberg reported previously.
 

“The industrial sector is the last sector to be digitized at scale,” creating a sweet spot for Aveva, Chief Executive Officer Craig Hayman said in an interview. “You end up with industrial firms who want to become software firms and that road is quite perilous. It rarely succeeds.” Similarly, software companies often lack the necessary specialist knowledge about industrial companies, he said.
 

Aveva shares rose 6.7% to 4,601 pence at 3:10 p.m. in London on Tuesday, giving the company a market value of 7.4 billion pounds ($9.7 billion). The stock has declined about 2.2% this year.
 

Rights Issue
 

The rights issue to fund the deal is the largest announced by a UK company this year, according to data compiled by Bloomberg. Although British firms are tapping the equity market in droves to shore up cash balances depleted by the coronavirus crisis, many are leveraging rising stock prices.
 

Aveva’s majority owner, Schneider Electric SE, has agreed to support the transaction, which is expected to close around the end of the year. Aveva combined with Schneider’s industrial software arm in 2018.
 

Osisoft makes data-management tools for the utility, pharmaceutical and oil and gas industries and says its PI System helps customers identify areas for cost savings, extend equipment life and expand production capacity. Kennedy’s fund will get about $600 million in the deal, and he’ll remain at the company as chairman emeritus, Aveva said. Osisoft’s smallest shareholder, Mitsui & Co. with a 5% stake, has said it will sell as part of the deal.
 

SoftBank, which acquired a holding in Osisoft in 2017 and owns a 44.7% stake, opted to be paid in cash, people familiar with the deal said, asking not to be identified because the details are private. The firm has been selling assets to finance buybacks and pay down debt. Its Vision Fund lost 1.9 trillion yen ($17.9 billion) in the last fiscal year after writing down the value of investments in firms including WeWork and Uber Technologies Inc.
 

A representative for SoftBank did not immediately respond to comment.
 

Lazard Ltd. acted as financial adviser to Aveva. Morgan Stanley advised Osisoft.