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Schneider Electric Said to Weigh Takeover Offer for Tyco

Monday, 11 Apr 2011 11:17 AM

Schneider Electric SA is weighing a takeover offer for Tyco International Ltd. that would make the French company the world’s biggest maker of security systems, said three people with knowledge of the matter.

Schneider is working with bankers to help it assess a potential acquisition of Tyco, said the people, who spoke on condition of anonymity because the matter is private. Schneider’s efforts are at an early stage and no deal is imminent, the people said. Tyco, based in Schaffhausen, Switzerland, had a market value of $22.3 billion as of April 8.

A purchase would help Schneider expand beyond electrical- grid management and parts by adding ADT, the biggest security systems firm, as well as fire-prevention equipment and services. Schneider, based in the Paris suburb of Rueil-Malmaison, is the largest maker of low- and medium-voltage equipment.

Tyco International rose 8.2 percent in U.S. premarket trading as of 7:02 a.m. local time. Schneider slumped as much as 5.65 euros, or 4.7 percent, to 115.8 euros in Paris. Paul Fitzhenry, a spokesman for Tyco, said the company doesn’t comment on speculation. Anthime Caprioli, a spokesman for Schneider, declined to comment.

Fraud, Prison

A sale of Tyco would cap a troubled corporate history in which L. Dennis Kozlowski built Tyco through acquisitions in the 1990s, only to end prison in 2005 for securities fraud. Tyco announced or completed more than 100 acquisitions from early 1994 through Kozlowski’s departure in June 2002, with an average since of $880 million for those with prices disclosed, according data compiled by Bloomberg.

Kozlowski and former Chief Financial Officer Mark Swartz were convicted in 2005 of securities fraud, grand larceny and falsifying business records.

Schneider said in February that 2010 net income doubled to 1.72 billion euros ($2.33 billion) from a year earlier as Chief Executive Officer Jean-Pascal Tricoire cut costs to help recover from a 2009 construction slump in the U.S. and Europe.

Making Deals

The company has announced or completed 11 acquisitions in the past year, including the purchase of Areva SA’s power- distribution unit in 2010, which it bought with Alstom SA of France. The team beat a bid from General Electric Co. Schneider also competes with companies including Siemens AG of Germany.

Schneider’s net debt was 2.7 billion euros at the end of 2010, giving it a debt-to-equity ratio of 18 percent. It had 2.6 billion euros of undrawn credit lines when it presented annual results on Feb. 16.

Chief Financial Officer Emmanuel Babeau said last year that Schneider aims to be stronger in industrial automation, where it ranks second behind Siemens and ahead of Rockwell Automation Inc. The company also aims to expand in building automation and security, where it trails behind Siemens, Johnson Controls and Honeywell International Inc.

Tyco split into three publicly traded entities in 2007, including the former parent, which Chairman and CEO Edward Breen runs from West Windsor, New Jersey, though the headquarters has since moved to Schaffhausen, Switzerland.

Tyco is the world’s biggest provider of industrial valves and fire-protection services and posted sales of $17 billion for the fiscal year ended in September.

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Schneider Electric SA is weighing a takeover offer for Tyco International Ltd. that would make the French company the world s biggest maker of security systems, said three people with knowledge of the matter. Schneider is working with bankers to help it assess a potential...
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