Schneider Electric to pay $US6.1 billion for APC

Stuart Corner
Monday, 30 October 2006 18:41

IT Industry - Deals

American Power Conversion (APC), a global supplier of power, air-conditioning and other infrastructure for data centres, to be acquired by Schneider Electric for approximately $US6.1 billion in cash, 30 percent above its current market value.
Paris-based Schneider Electric is a global provider of solutions for electrical distribution, industrial control and automation projects. It says the combination of the two businesses "will create an industry leading business for both single-phase and three-phase uninterruptible power supply (UPS) systems as well as the pre-eminent provider of integrated systems for IT and data centre applications."

Rob Johnson, APC's president and CEO, said that, as part of Schneider Electric, APC would have "greater resources to accomplish our long-term plans, which will be favourable for our employees, customers, business partners and suppliers worldwide."

The merger comes at a time when data centre power is becoming an increasingly critical issue for IT companies. According to Gartner Group, today energy costs typically form less than 10 percent of an overall IT budget, but this could rise to more than 50 percent in the next few years.

Gartner's chief of research, Steve Prentice, said: "The bottom line is that the cost of power on this scale would be difficult to manage simply as a budget increase and most CIOs would struggle to justify the situation to company board members."

The country manager of APC for Australia and New Zealand, Gordon Makryllos, told iTWire that data centre infrastructure was becoming the key bottleneck from customers wanting to deploy the new technologies to keep up demand for processing and storage."

As a result of the increasing power and decreasing size of IT hardware, Makryllos said the physical infrastructure's share of the total cost of a data centre versus the IT equipment was growing at about 50 percent per year and expected to rise from 10 percent to about 70 percent in a few years time. According to Makryllos, grid power is now one of the main factors limiting data centre growth and determining the locations of new data centres. "There are some major issues out there where customers simply cannot get the power on their floors," he said.

The transaction is expected to close in the first quarter of 2007. APC's shareholders are expected to vote on the transaction in early 2007. Approval from Schneider Electric's shareholders is not required.

APC reported sales of $US2 billion for the year ended December 31, 2005, and is a Fortune 1000, Nasdaq 100 and S&P 500 company. Schneider Electric claims to be a world leader in automation and electricity management. It reported revenue of euro 11.7 billion in 2005 and had 88,670 employees in 130 countries.