Merger will not affect local representative

by David Kelleher

The merger between electrical equipment giants Schneider Electric and Legrand will not affect their representative in Malta – Elektra Ltd.
Speaking to The Malta Business Weekly, managing director Michael Ellul Vincenti said that the merger was in the pipeline for a number of years.
“It was an obvious move for both companies and was expected to happen. The merger itself will not have an effect on us because we represent both companies here in Malta,” Mr Ellul Vincenti said. On Monday, France’s Schneider Electric said it would pay 6.7 billion euros (US$6.3bn) to buy domestic rival Legrand in a friendly all-share deal which creates a world leader in low-voltage electrical components. The low voltage market refers to the domestic lighting products of which Legrand was a world leader.
Mr Ellul Vincenti said that the merger will enable Schneider to enter the low-voltage market and welds the complementary industrial equipment holdings of Schneider and low-voltage fittings, wiring accessories and consumer electrical products of Legrand.
“The two companies will continue to work separately but there will be collaboration between them and also sharing of resources and research,” Mr Ellul Vincenti said.
News of the deal was well received although analysts warned the mer-ger could raise competition concerns with the EU. Analysts described the cost savings anticip-ated by the two groups as ambitious, but said the business logic was
compelling.
“Strategically the deal makes a lot of sense,” said Adrian Darley, portfolio manager at Gartmore Investment Management, which holds stakes in both firms. “We think low-voltage is a very attractive business area and if you buy good quality assets you have to pay a premium.”
Under the agreement, Schneider will offer seven of its own shares for every two shares of Legrand, a 19.8 per cent premium over Legrand’s Friday 12 January closing price of 222 euros. Holders of Legrand preferred shares will receive two Schneider shares for each share held, a 25.5 per cent premium.
Schneider will also assume 1.5 billion euros in Legrand debt under the deal, taking its gearing to 63 per cent from 50 per cent.
The deal is expected to generate revenue and cost savings of 210 million euros from 2003, with 120 million euros coming from the cost side and 90 million euros estimated from revenues. The companies said that their combined operations would derive 20 per cent of their sales from France, 37 per cent in other European countries, 29 per cent in North America and 14 per cent in other parts of the world.