Schneider Electric Enhances Its Position in Core Low Voltage with the Acquisition of ASCO Power Technologies

Schneider Electric, a global specialist in energy management and automation, announced that it has signed an agreement to acquire Asco Power Technologies (”ASCO”), a leader in the Automatic Transfer Switch (“ATS”) market for $1,250m (about €1,072m) in an all cash transaction. The acquisition enhances Schneider Electric’s EcoStruxure Power Platform in key markets and segments.

ASCO currently employs about 2,000 people, mainly in North America, and operates 7 manufacturing sites. Its revenues in CY2016 reached $468m with an adjusted EBITDA margin of about 23%. ASCO, founded in Baltimore, has a long history in Power Management, first introducing ATS in 1925 and later expanding into surge, loadbanks, and fire pump and control applications. ASCO’s products are sold under the brands of ASCO, Firetrol, Avtron, Froment. Since December 2016, ASCO has been operating as an autonomous part of Vertiv (formerly Emerson Network Power).

ASCO is a market leader in power source management for critical buildings in North America. ATS automatically transfers critical loads from the primary source of power to the back-up power source in the event of a power outage. It requires compliance with specific technical regulation standards. Schneider Electric is a market leader in the ATS market in China. Both companies also operate in the ATS market in the rest of the world. With this acquisition, Schneider Electric will further enhance its position as a global market leader in ATS.

With the addition of the ASCO portfolio, Schneider Electric’s EcoStruxure Power Platform is further enhanced in North America with additional opportunities in the rest of the world. From an end-market perspective, the acquisition further enhances Schneider Electric’s value proposition in the end-to-end Energy Management chain for customers in Healthcare, Financial services, Datacentres, and other Critical Buildings.

The market for ATS presents long-term growth opportunities as more commercial and industrial customers move towards autonomous or multi-source power management. This trend is driven by a more decentralized power generation world, which is core to Schneider Electric’s strategic focus.

The transaction price of $1,250m reflects a multiple of about 11.7x the adjusted EBITDA CY2016. The transaction will be accretive to the Group adjusted EBITA margin and will provide revenue and cost synergies expected to generate about $40m yearly in adjusted EBITA (approximately two-thirds from revenues synergies and one-third from costs synergies). The cost of implementing these synergies is expected to be up to $50m. The transaction meets the return criteria set by the Group, with an expected accretion of Adjusted EPS2 in the first year and with an expected return on capital employed exceeding WACC beyond the third year post closing. The acquisition is subject to customary regulatory approvals and is expected to be closed by end-2017. Post deal closure, the ASCO business will form part of the Schneider Electric Building business (Low Voltage).

Keywords: Energy Management, Automation, Automatic Transfer Switch (ATS), Power Management, Power Source Management, ARC Advisory Group.