Funds advised by Davidson Kempner European Partners, LLP ("DK") currently hold 11.4 million shares, equivalent to 3.8% of the total shares outstanding of AVEVA Group plc ("Aveva" or the "Company")
DK will not support the Scheme at the current price
LONDON, Nov. 10, 2022 /PRNewswire/ -- DK believes the current price offered by Schneider Electric SE ("Schneider" or the "Acquirer") to Aveva's minority shareholders of £31 per share substantially undervalues the Company's long-term prospects. The timing of the approach by Schneider is highly opportunistic and comes on the back of a broader market decline as well as weakness in Aveva's own share price resulting from the transition to a subscription and SaaS model (Aveva had fallen 48% from the highs of £42 per share in September 2021 to £22 per share before the announcement of the Schneider approach in August 2022). The Company's transition has been widely perceived by the market to have been poorly executed and communicated under the stewardship of the current Aveva CEO, Peter Herweck, who has been on secondment from Schneider since May 2021. DK does not think the uncertainty around this transition reflects concern over the long-term value of the franchise, a view which is supported by Aveva management's own five-year targets (announced at the Capital Markets Day in June 2021). We share Schneider's belief that Aveva is a well-positioned business operating in a secular growth market with strong tailwinds. If Schneider wishes to secure full ownership of a strategic asset at such an opportune moment it should make an offer for Aveva at a price which provides minority shareholders their share of the long-term value.
There are multiple datapoints which clearly indicate that £31 per share substantially undervalues Aveva. The current offer terms represent a 1 year forward Enterprise Value to EBITDA ("EV/EBITDA") multiple of 24x1. This is low relative to recent precedent transactions in the industrial software space; particularly the AspenTech/Emerson deal (34x2 1 year forward EV/EBITDA) which looks most comparable to Aveva and which completed in May 2022. The £31 per share price is even at a discount to the December 2020, £2.8bn rights issue by Aveva to fund the acquisition of OSIsoft with a TERP of £33.28 per share3.
Aveva shareholders have clearly and publicly expressed dissatisfaction with the substantial discount that the current price represents for such an attractive software asset. We also note the recent proxy report issued by Glass Lewis which concludes that shareholders should vote against the transaction on the basis of questionable timing and poor valuation. The message from the market is quite clear and accordingly we expect the Scheme, on the current terms, to fail. If Schneider recognises that the Scheme will fail, then under the Co-Operation Agreement, it could seek to switch to an Offer with the consent of the Independent Committee and lower the level of shareholder support it requires to succeed by reducing the acceptance condition to a majority of minorities from the current 75% requirement. Should this occur, we would encourage the Chairman, Philip Aiken, and the Independent Committee to dispel shareholders' concerns around the robustness of their conduct in the process so far by only agreeing to a switch on terms that more fully reflect the value that Aveva's shareholders see in the Company.
1 Based on Bloomberg consensus (9/11/2022) EBITDA estimates for FY 2023 (£372mn) and FY 2024 (£424mn) which calendarise to £411mn for CY 2023. EV of £10bn / EBITDA of £411mn = 24x EV/2023 EBITDA.
2 Bernstein research published 15th September 2022.
Media contact:
Matthew Goodman
greenbrookdavidsonkempner@greenbrookadvisory.com
+44 (0) 20 7952 2000
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