World news: June 2011
Schneider buys Chinese MV drives-maker for $650m
Schneider Electric is buying the Chinese medium-voltage drives manufacturer, Leader Harvest Power Technologies Holdings, for around $650m. The Beijing-based company, known as Leader & Harvest, has been growing by more than 20% a year in recent years, and is expected to generate sales worth about $150m this year with a margin of about 20%. It employs more than 750 people and has a sales and service network across 30 Chinese provinces.
Schneider is buying Leader & Harvest from its private equity co-owners, Affinity Equity Partners and Unitas Capital, which acquired it for around $200m in October 2009. According to Reuters, ABB was also bidding for the Chinese business.
Schneider says the deal will give it:
• technical competency in MV drive technology;
• a strong position in the Chinese MV system drives market, which represents about 40% of the global MV drives market;
• an enhanced portfolio, especially for end-markets such as cement, mining, metals and energy; and
• a front office employing 150 sales personnel and 100 service engineers.
Leader & Harvest produces MV drives in voltage ratings from 2–11kV, complementing Schneider’s low-voltage drives portfolio and its Altivar 1000 MV drives which span ratings from 2.3–3.3kV. It is estimated that about 70% of the world’s MV motors are not yet equipped with drives.
“Leader & Harvest’s range represents an excellent addition to our industrial automation range of products and solutions,” says Clemens Blum, executive vice-president of Schneider Electric’s Industry business. “Medium-voltage drives are a key element of energy-efficient solutions to our key target segments of mining, minerals and metals, and water and wastewater.
“The transaction also enlarges our customer reach and presence in China, which is a key market for our business,” he adds. “It also provides us with the opportunity to increase our penetration in a number of countries, especially in the new economies.”
Schneider expects the acquisition to be “highly synergetic” and estimates that the EBITA impact from synergies will be $25–30m in 2015. This will come mainly from revenue synergies of $115m, achieved by cross-selling to the two companies’ Chinese customers, as well from as geographical expansion. Schneider Electric also expects cost synergies to accrue from adding Leader & Harvest to its Chinese operations.
Completion of the transaction is subject to regulatory approvals. The acquisition is expected to be accretive on earnings per share from the first year, and to meet Schneider Electric’s return-on-capital-employed criteria in 2015.