Aveva Group Plc (OTCMKTS:AVEVF) has reached an agreement to purchase SoftBank Group Corp (OTCMKTS:SFTBY)-backed OSIsoft in a deal estimated to be around $5 billion.
Aveva acquires OSIsoft in a $5 billion deal
The Cambridge, UK-based Aveva will acquire the industrial software through a $4.4 billion cash payment and rights issued of $3.5 billion. The rest of the transaction will be funded through debt. CEO and Founder Patrick Kennedy’s family and SoftBank’s Visions Fund jointly own OSIsoft. Aveva beat several other bidders for OSIsoft including the likes of Emerson Electric Co.
More deals are expected going forward as industrial companies change focus to software-based automation which helps in the efficient running of machinery and factories. In an interview, Aveva’s CFO, James Kidd stated that the company is better positioned to play a vital role in further consolidation.
Craig Hayman the CEO of Aveva stated that there is a huge opportunity in the industrial sector considering it is the last to be digitized at scale. He added that most industrial companies end up wanting to become software companies in a path that is perilous and they hardly succeed. Also, software firms usually lack the required specialist knowledge regarding industrial companies.
Biggest rights issue by a UK firm
According to data from Bloomberg, the rights issue for funding the transaction will be the largest announced in 2020 by a UK firm. Although UK firms are leveraging the equity market in large numbers to boost depleted cash balances amid the coronavirus pandemic, most are leveraging increasing share prices.
The company’s majority shareholder, Schneider Electric SE will support the deal that is expected to be finalized before the end of this year. OSIsoft is a provider of data management tools for pharmaceutical, utility, as well as gas and oil industries. Its PI System helps clients in identifying cost-saving areas, where they can expand in production and extend equipment life.
Aveva said that Kennedy’s fund will get around $600 million from the deal and Kennedy will continue as Chairman emeritus of the company. Mitsui & Co will also sell its 5% stake in OSIsoft part of the deal.