ALEX BRUMMER: Aveva deal is a Threat to UK tech ambition

Threat to UK tech ambition: Aveva deal is major test case for National Security and Investment Act, says ALEX BRUMMER

The level of publicly declared opposition to French giant Schneider’s effort to buy out minority shareholders’ stakes in British software innovator Aveva is unusual.

Despite owning 59 per cent of the shares, Schneider, advised by Citi, has struggled to secure an offer valuing Aveva at just under £10bn down the line.

The French company recognized early on the value of manufacturing software developed by Cambridge and written by Aveva and injected some of its own technology into the business and supported Aveva’s acquisition of US competitor Osisoft.

Frustrated: Despite owning 59% of the shares, Schneider, advised by Citi, has struggled to win a bid that values ​​Aveva at just under £10bn down the line.

Frustrated: Despite owning 59% of the shares, Schneider, advised by Citi, has struggled to win a bid that values ​​Aveva at just under £10bn down the line.

There is a huge difference between being an independent FTSE 100 company, with an independent board and governance, and being the wholly owned subsidiary of a French electricity conglomerate. Aveva operates an open architecture for its software (similar to Arm Holdings) and offering. The document indicates that this and continued investment in R&D will continue.

However, we live in turbulent times and such commitments during a global recession are difficult to enforce.

Schneider may be in effective control of Aveva but he is not in command. All the evidence suggests that, as critical as an overseas subsidiary of a foreign-owned company may be, when the time comes and costs need to be cut, a UK subsidiary will be more vulnerable to cutbacks than the domestic company.

This is especially true of France, which has put up such high protectionist barriers around its own key industries.

At a time when Chancellor Jeremy Hunt touts Britain as the “world’s next Silicon Valley”, it’s hard to see that happening when the UK dumps its crown jewels so easily.

Again, this is especially true for Aveva, as its software could be vital in driving the renewable energy agenda at home and abroad.

A government that expelled Huawei from sensitive parts of the telecommunications network and seeks to undo the acquisition of Newport Wafer Fab by a Chinese-controlled entity should not be comfortable with the transfer of technology that could occur under the new ownership structure.

Before, when shareholders spoke, there was no going back. This is not true. Despite commitments made by US satellite company Viasat not to defend British rival Inmarsat, the deal ended with an investigation by the Competition and Markets Authority.

The intervention came too late to save a number of innovative mid-range UK companies, including Cobham and Ultra Electronics, from close scrutiny.

Aveva is a major test case for the National Security and Investment Act. Schneider must not see it as “ordination” and let it go unnoticed.

blue sacred!

A fine example of Anglo-French cohabitation is the Kingfisher DIY champions. The owner of B&Q and Screwfix in the UK and Castorama and Brico across the channel is a retailer for all seasons.

In the pandemic he was embraced by the masses of the WFH. China-educated CEO Thierry Garnier was quick to adopt online.

After a post-Covid slump, it is benefiting from the energy fallout from the war in Ukraine. Sales of loft insulation are up 108 percent year-on-year and Screwfix is ​​doing big business in thermostatic radiator valves, anticipating the chancellor’s push to get people to slash energy bills by 15 percent.

Following the Covid boom, Kingfisher shares have taken a beating and the top end of the 2022 earnings forecast has been cut to £760m from £770m. This is below the peak pandemic gains of close to £1bn.

There is still a lot of life in DIY and France is the next stop for Screwfix.

Shameless

Out of nowhere comes an unsolicited email from Schroders, extolling the virtues of the UK Public Private Trust.

With the share price at 15.3 pence, the shares are selling at a steep discount of 50.5 per cent on the value of the assets. As the owner, I would love to see the discount closed.

But I can’t erase my disgust that in its previous incarnation, as Woodford Patient Capital, Neil Woodford stuffed the trust with shares of his now-liquidated main equity fund while desperately seeking to meet regulatory requirements.

More than three years later, the Financial Conduct Authority has yet to tell us what went wrong and who should take the blame.