The smart grid market is a burgeoning field, and when it comes to merger and acquisition activity, this is the place to look.
On Wednesday, French company Schneider Electric (PARIS: SU) announced its plan to acquire the Spanish company Telvent GIT (NASDAQ: TLVT), an electric grid software company.
Schneider Electric specializes in power network equipment sales but is looking to expand into the smart grid software industry.
Within the year Schneider has been following through on plans to expand in the field, last week acquiring 74% of an Indian energy storage company called Luminous.
There has even been talk of Schneider planning to buy out the US company Tyco International for near $30 billion.
Talk about major corporate buyout.
Schneider officials have denied these claims.
The speculation over this caused Schneider stock to drop in April, as investors feared such a large-scale takeover and what that might mean for the company.
For now, Schneider has decided to stick with small-to-medium scale acquisitions.
A smart move, considering the potential consequences.
The agreement with Telvent will allow Schneider to execute the takeover for €1.4 billion, or $2 billion.
Once this occurs, Schneider Electric will expand the market for Telvent.
The software company is currently popular for the management of electricity grids and transportation systems in the Americas, but Schneider wants to expand this all the way to the Middle East and Asia.
This will give it a lot of room to grow.
The Spanish company Abengoa currently owns 40% of Telvent, but plans to sell it to Schneider in an attempt to decrease its own debt.
Schneider certainly isn’t the first in smart grid-related acquisitions.
Several weeks ago Toshiba Corporation (TOKYO: 6502), the Japanese electronics company, announced their plan to buy out Landis+Gyr, a Swiss meter maker.
Toshiba has been involved in the smart grid market a bit, but they’re looking to expand their involvement just like Schneider.
According to Landi+Gyr, Toshiba has promised to maintain their products and simply make them more accessible.
The smart grid market is becoming essential to energy efficiency, allowing the consumer to work with the generator in optimizing electrical efficiency.
These recent acquisitions mean the growth in the market that is occurring most likely will continue to occur.
That’s all for now,