US regulators have given their formal OK for Cambridge-based Aveva (AVV) to merge with the software business of French engineering firm Schneider Electric.

Aveva designs computer-aided design and manufacturing software, mainly used in the development of big oil and gas, marine and nuclear energy markets.

The regulatory thumbs-up relates to the £3bn merger deal, one that will roughly double the size of the combined business. If you’re wondering why the combination of a UK business with a French one needed US approval, it’s because both operate globally, and have significant customer interests in the States.

The merger will create a business with close on £700m worth of revenues and valued at about £3.5bn.

CASH WINDFALL CONFIRMED

The merger is both long-running and complex, but importantly for UK investors, it will trigger a £650m cash return once completed. That’s a £10.15 per share payout.

We have confirmation today of that end-game, with the record date of 28 February set for the one-off cash payout, so less than two weeks from today.

The record date is the point at which investors need to be officially recognised on the share register of Aveva to qualify for the special dividend.

Aveva shares have nudged 40p higher on Monday to £27.84 following today’s merger and cash return confirmation. However, once the cash return is made, expect that share price to adjust, effectively taking £10.15 off the stock price to reflect the special dividend payout.

WHEN WILL INVESTORS GET THE MONEY

Cheques will start to land on shareholder doormats during the first couple of weeks of March, or accounts credited if your stock is held through the Crest settlement system.

Without getting too bogged down in detail, the cash return is being executed through a B share process, which are issued to shareholders then cancelled for cash. It’s a technical issue but the implications for investors relate to how the cash windfall will likely be treated for tax.

Aveva has had talks with HMRC, the UK tax authority, and been guided that the £10.15 per shares should be treated as income, and taxed accordingly in the UK. But if you’re unsure, investors should check with their own broker or tax advisor to check individual circumstances.

AVEVA’S PROSPECTS

It’s been a volatile past three years for Aveva. End oil, marine, nuclear markets have been stretched which has clamped down on big capital investment projects that pay-off for the company. That worm might be turning.

In the meantime, expect more news from the company over the coming days. First up should be a trading update for the Schneider bit of the merging pair, expected on 15 February.

On 19 February new chief executive Craig Hayman will start work, and we expect details on the future strategy of the enlarged company during this busy month of news.


Issue Date: 12 Feb 2018