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

The level of public opposition to French giant Schneider’s attempt to buy out the minority shareholders of British software innovator Aveva is unusual.

Despite owning 59 percent of the shares, Schneider, advised by Citi, has struggled to secure a bid that values ​​Aveva at just under £10 billion.

The French company recognized early on the value of Aveva-developed production software developed in Cambridge and injected some of its own technology into the company, supporting Aveva’s acquisition of US competitor Osisoft.

There is a huge difference between being a standalone FTSE 100 company, with an independent board and independent management, and being a wholly owned subsidiary of a French electrical conglomerate. Aveva maintains an open architecture for its software (similar to Arm Holdings) and the offering 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 actual control of Aveva, but he is not in charge. All the evidence suggests that, as critical as an overseas arm of a foreign-owned company is, when it comes down to it 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 erected such high protectionist barriers around its own major industries.

At a time when Chancellor Jeremy Hunt touts Britain as ‘the world’s next Silicon Valley’, it’s hard to imagine this happening when the UK so readily disposes of its crown jewels.

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

A government that has kicked Huawei off sensitive parts of the telecom network and is trying to unwind the acquisition of Newport Wafer Fab by a Chinese-controlled entity should not feel comfortable with the technology transfer that could take place under the new ownership structure.

It used to be that once shareholders have spoken there is no turning back. This is no longer true. Despite assurances from US satellite company Viasat not to defend its UK rival Inmarsat, the deal has ended with an investigation by the Competition & Markets Authority.

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

Aveva is an important test case for the National Security & Investment Act. It should not be seen as a ‘clean-up’ by Schneider and allowed to sneak under the radar.

Sacred blue!

A good example of British-French cohabitation is DIY champion Kingfisher. The owner of B&Q and Screwfix in the UK and Castorama and Brico across the channel is an all season retailer.

During the pandemic, it was embraced by the WFH masses. China-educated CEO Thierry Garnier was quick to embrace online.

After a post-Covid dip, it is benefiting from the energy drain from the war in Ukraine. Attic insulation sales are up 108 per cent year-on-year and Screwfix is ​​doing a tremendous trade in thermostatic radiator valves ahead of the Chancellor’s efforts to get people to cut energy bills by 15 per cent.

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

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

Shameless

Suddenly an unsolicited e-mail arrives from Schroders, extolling the virtues of the UK Public Private Trust.

With a share price of 15.3 pence, the shares are being sold at a hefty 50.5 percent discount to their net asset value. As a holder, I would like to see the discount closed.

But I cannot erase my horror that the trust in its previous incarnation – as Woodford Patient Capital – was stuffed by Neil Woodford with holdings from his now-liquidated main Equity Income fund as he desperately tried to comply with 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.