According to a press release, Pelco will report into Schneider Electric's Building Automation business unit, encompassing power and HVAC control and electronic security and fire safety applications, and will assume leadership of Schneider's present Fire & Security product division.
"This acquisition significantly reinforces our building automation business unit," comments Jean-Pascal Tricoire, CEO of Schneider Electric. "Pelco systems will integrate gradually into our power and control solutions for buildings and infrastructure. Security offers a highly attractive growth profile and video is becoming the key application in the building management market."
"The combination of our companies will create a unique portfolio of products, services and solutions in the building management industry," adds Arne Frank, executive vice president of Schneider's Electric Building Automation business unit. "Pelco's unique position in IP-based video security represents a tremendous additional organic growth opportunity. With this acquisition, a very important additional step is made to further reinforce our leadership in open and integrated solutions for building IT."
The price to be paid for Pelco is $1,220 million, expressed as an enterprise value on a cash-free debt-free basis. In addition, Schneider Electric will pay to the sellers the net present value of a tax benefit resulting from the step-up of Pelco's assets, representing $320 million. As a consequence, the total price paid in cash at closing will be $1,540 million. Pelco had a net debt of roughly $139 million as of June 30, 2007.
The transaction is expected to generate revenue and cost synergies estimated at $67 million on EBITDA in 2011, and is expected to be accretive to EPS from year 1 and the ROCE to cover Schneider Electric's cost of capital in year 3, in accordance with the acquisition criteria.
The transaction is subject to anti-trust and other regulatory approval and is expected to close by October 2007.