Schneiders has come off a period of restructuring and now is spirit to be in the forefront of the consolidation in the persistence that it feels will happen globally. Schneider feels that with the advent of worldwide harmonization of standards, probably to the European IEC, the playing field will narrow to but global players. At this time Squ atomic number 18 D was non interested in being acquired.
In order to judge the strategical fit of these two companies, we will need to look at it from several levels. Their corporate cultures are not a haul so the only information able to be obtained comes from this article. Geographically, they twain impart small presence in the others home market, which is a strong plus. Square D has a sales harvesting of 3.5% in 1990, but almost half of that comes from the 15% return in Europe, which is only 10% of their total sales. They also have an overall operating margin of 10.8% which is dragged down by a 2.2% margin on the European business. Square Ds increase in Europe is at the expense of Schneider, so the optical fusion will help stem margin deterioration cod to their competition.
A key factor is if the savings in operations attached by Lazard Freres of $60 million can be achieved.
If this is not a possibility, under a simple combination of the income statements and rest sheets the overall ROE which consists of Square Ds 18.9% and Schneiders interlock of 9.1% would net out to an 11.4%. If the savings were included the rate would move up to 12.9%. This is of course excluding any goodwill, write-downs and restructuring charges. Obviously Square Ds wage of $115 million on and equity of $603 million (18.9%) are an attractive addition to Schneiders balance sheet, but it does appear...
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