As it expands its data center business amid soaring demand, France’s Schneider Electric reached its largest deal ever on Monday, agreeing to purchase US software giant PTC for about $22.6 billion.
However, as investors considered the size of the acquisition, the high premium provided for the shares, and the prospects for software businesses’ valuations amid market uncertainty relating to artificial intelligence, the French engineering company’s shares tumbled about 10% in early Paris trading.
Before Monday’s losses erased about €15 billion ($17 billion) from its market capitalization, Schneider’s shares were up 29% year to date as of Friday’s close.
Software values are still affected by concerns about AI disruption, which permits acquiring PTC at a ten-year low valuation but may still have an impact on Schneider after the deal, according to a letter to investors from Jefferies.
Nay Soe Naing, a Berenberg analyst, told reporters that despite the software industry’s tough investor sentiment and tight valuation environment, the purchase offered a healthy valuation.
US premarket trade saw a 34.4% increase in PTC shares.
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DATA CENTER BUILD-UP BACKBONE
Previously best known for industrial parts like fuses and circuit breakers, Schneider now constructs the foundation of data centers, providing everything from server racks and cooling units to vital power distribution equipment.
The Boston-based company’s product-design and lifecycle-management software would be added to PTC’s offering, expanding its industrial software and AI business.
Olivier Blum, CEO of Schneider, told investors that PTC’s engineering and design data would improve Schneider’s capacity to implement AI throughout the industrial operations of its clients.
According to him, the combination would increase Schneider’s software-as-a-service income to roughly 24% of the group’s total, hastening the company’s transition from automation and electrical equipment to higher-growth, recurring-revenue software.
Schneider’s profitability is being driven by the surge in demand for data centers, especially from the US. This new source of income is helping the company offset its downturn in some conventional electrical-equipment sectors.
Growing demand for PTC’s AI-powered tools has also helped the company, which offers software solutions for developing, manufacturing, and servicing products across several industries.
The deal on Monday comes after Schneider agreed to purchase Cognite Holding, a privately held supplier of industrial data and artificial intelligence software, in June.
DEAL INFORMATION
According to LSEG data, the deal would be Schneider’s biggest acquisition ever and one of the biggest in Europe this year.
Additional debt of €16 billion to €17 billion and the issuance of additional shares worth €5 billion to €6 billion under an existing shareholder authorization would be used to finance it.
Schneider Electric is offering $205 per share to acquire PTC, valuing the software firm at an enterprise value of $23.7 billion.
This buyout price gives existing stockholders a 42.3% premium over the company’s final market close.
As France’s third-largest publicly traded corporation, Schneider projects that by the third year after the buyout, the combination will unlock €250 million in annual cost savings and €800 million in revenue gains.
Pending regulatory approval and a shareholder vote, the transaction is expected to close by Q3 2027.
