Aug. 25, 2020 - Industrial Software company AVEVA announced the acquisition of OSIsoft famous for the PI Historian for the purchase price of $5 billion expanding the company’s digitalization offerings. This was discussed in a virtual meeting Aug. 25, 2020 with:
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Craig Hayman, AVEVA CEO
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Dr. J. Patrick Kennedy OSIsoft founder & CEO
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Peter Herweck, Schneider Electric, Executive Vice President Industrial Automation and AVEVA Non-executive Director
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Philip Aiken, AVEVA Chairman
The acquisition was described as a transformative transaction for the next phase of AVEVA’s journey, strengthening AVEVA’s position as one of the leading "independent" industrial software companies powering Industry 4.0. AVEVA and OSIsoft will combine their complementary product offerings, bringing together industrial software and data management capabilities.
Builds on AVEVA/Schneider Electric hybrid relationship
This builds upon the 2018 merger of Schneider Electric’s industrial software business, including Wonderware, into AVEVA. Schneider Electric took 60% ownership of the Enlarged AVEVA Group at that time and Schneider Electric has a role in the AVEVA acquisition of OSIsoft.
Purchase price
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Enterprise value of $5.0 billion on a cash-free, debt-free basis and on the basis of a normalized level of working capital at completion.
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Purchase Price - $4.4 billion cash
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$0.6 billion share consideration to be issued to Estudillo Holdings Corp. resulting in Dr. J. Patrick Kennedy owning over 4% of the enlarged company.
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Financing
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$3.5 billion proposed Rights Issue. Schneider Electric has committed to vote in favor and subscribe on a pro rata basis.
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$0.9 billion from existing cash on balance sheet and new debt facilities, resulting in pro forma net leverage of 1.9x FY20 EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for the Enlarged Group.
Timing
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Circular and Prospectus to approve the transaction and launch the proposed rights issue expected in October or early November 2020
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Closing at or around the end of the calendar year
Digitalization edge to enterprise & cloud
Those in the meeting expressed their thoughts and approach for accomplishing edge to enterprise & cloud digitalization driven by industry 4.0 and Industrial Internet of things concepts and technologies.
Craig Hayman:
“The industrial sector as compared to other industries has very low amounts of digital technology deployed as compared to other areas such as retail or financial services." He described how many companies outside of the industry have come in and said, “Behold, I have a platform, my edge to IT, OT convergence architecture is all singing and dancing subscribe to my point of view and all will be right in the world. Let’s be polite and say those results are never satisfying as first represented. We don’t think that’s pragmatic because when you have to deploy a brand-new end to and platform you have to suspend all of human history where the world is naturally diverse in order to do that.”
He continued, “We have a very different approach, yes have a system point of view but be open to interconnectivity between different systems.” Hayman noted that he and Pat Kennedy have had very deep conversations about Aveva, OSIsoft, and Schneider as being a “Switzerland, a common ground.”
Dr. J. Patrick Kennedy:
Pat Kennedy discussed that when his company started in the 1980s, there were companies that developed an entire business plan around one interface, and "because we were applications people, we couldn’t live with a single interface because the data you need for your particular function is set by physics," he explained. "It’s not set by the data being in particular DCS, a multiplexer or other device.” “We started writing interfaces 40 years ago and 1/3 of our development is still interfaces," he said. "The amount of data coming in will continue to grow.
If I have a tissue machine and I want something looking for flaws in that tissue I’m going to use cameras, we have to work with companies familiar with cameras and image processing.” He punctuated this by adding there are growing application areas including synchronous phasers, LIDAR, and other technologies. “What I see happening is we will never converge to a single turnkey system for everybody, what we have to do is accommodate everybody because there are hundreds of companies.” He described how based on his many years’ experience the basic tenant is greater value is achieved by increasing the scope of the data and users are embracing this.
“Customers are driving for bigger and bigger scope. . . .
I see us becoming a very, very open infrastructure making more data available for more applications.” He continued, “Yes, there will be distributed historians they will be in the fork lifts, cars, machines. It doesn’t make any sense to build turbines that don’t have an embedded historian and data collection.”
Kennedy added, “The limit were going to hit is the ability of people to maintain the software. . . .
There will be a lot more software generated to automatically spin up things like intelligent forklift, historian or whatever.”
Peter Herweck:
“I am a fan of decoupling hardware and software because I believe for many years software will rule the world and automation and digitization," Herweck said. “With that, it will be much easier to further interface all the software that’s done by the combination of AVEVA and OSIsoft and there’s going to be plenty of more data. . . .
People are generating more data because they realize it creates more value for them.” He described how hardware will be a means to implement distributed architectures with software at all levels including edge, on premises, enterprise, and cloud depending on customer performance and functional requirements to satisfy diverse needs.
Philip Aiken
: “Coming as a customer from the oil & gas and mining industry there has been incredible growth over the last few years of more and more data being available to run operations," Aiken explained. “One of the first considerations that Aviva had when it merged with Schneider Software was to give ourselves more bandwidth to operate cradle-to-grave, developing a project right through operations and maintenance.
The board saw this as strategically the right combination with OSIsoft to not only collect the information but store and develop it. . . .
The opportunity here that the new venture we have with OSIsoft gives us the ability to give customers solutions that can never have dreamt of some years ago.”
Final thoughts
The hybrid AVEVA/Schneider Electric relationship is intriguing, and with the addition of OSIsoft provides another valuable dimension. Another part of the discussion was the pandemic that has exposed a number of problems and issues that can be solved with digitalization. In addition, the pandemic has stimulated people’s thinking about opportunities that can be unlocked through digitalization. Craig Hayman’s final comment on the integration from edge to enterprise and cloud is that there will be more information after the deal closes.
