Pelco Goes Big

Press ReleasePelco_logo

Schneider Electric further expands its Building Automation offering with the acquisition of Pelco, a worldwide leader of video security Rueil-Malmaison, France, August 1, 2007 – Schneider Electric announced today the acquisition of California-based Pelco Inc., a privately held company. Pelco is a worldwide leader in the design, development and manufacturing of video security systems. Pelco will further strengthen Schneider Electric’s Building Automation offering Commercial, industrial and residential buildings represent more than 50% of Schneider Electric business. Building Automation, which encompasses power and HVAC control, electronic security and fire safety, is one of Schneider Electric’s new businesses. The acquisitions of TAC, Andover Controls and Invensys Building Systems have enabled the Group to become a major player in that business.

Security management, power and HVAC control are increasingly integrated into a unique building automation system to answer growing customers’ needs for security and energy efficiency. This integration provides customers with significant savings on both investment and operating costs. Through the acquisition of Pelco, Schneider Electric rebalances its Building Automation solutions portfolio by reinforcing its already existing security platform (sales of €155 million in 2006) and strengthens its ability to offer fully integrated systems.

The video security industry is the most attractive segment of the security industry. It is shifting from pure analog communication protocols to more high value-added IP protocol and software based solutions. It complements/replaces other security systems such as intruder detection, fire alarm or access control.

Pelco is the best possible fit for Schneider Electric to expand into building automation and security

– Leader in the fast growing video security industry;

– Highest brand recognition in the industry;

– Broadest product line in the industry with the unique ability to offer full end-to-end solutions;

– Strong innovation capabilities with significant R&D investments representing 7.5% of sales;

– Premier customer base thanks to world-class technical support and customer service;

– Strong sales & marketing organization with a wide geographical coverage (130 countries);

– Solid track record of above industry growth with a CAGR of 21% over the period 1997-2006
(sales of $506 million in 2006);

– Significant potential for profitability improvement through operational leverage (EBITDA of
$46 million and EBITA of $30 million in 2006).

Pelco will report into Schneider Electric’s Building Automation business unit, and will take the leadership of its present Fire & Security Product Division. Significant synergies will occur from the leveraging of Schneider Electric’s Building Automation businesses, including their respective distribution networks and the possibility to offer complete solutions. The transaction is expected to generate revenue and cost synergies estimated at $67 million on EBITDA in 2011.

Pelco contributes to Schneider Electric’s strategy of growth David Mc Donald, President and Chief Executive Officer of Pelco, commented: “Schneider Electric is an ideal partner for Pelco. Both companies share the same commitment to people, innovation and customer service that will make our combined enterprise an even stronger, more competitive player in the industry. We look forward to the unique benefits this partnership will bring to our customers and employees.”

Arne Frank, Executive Vice President of Schneider Electric Building Automation business unit, said:
“The combination of our companies will create a unique portfolio of products, services and solutions
in the building management industry. Pelco’s unique position in IP-based video security represents a
tremendous additional organic growth opportunity. With this acquisition, a very important additional
step is made to further reinforce our leadership in Open & Integrated solutions for Building IT®.”

Jean-Pascal Tricoire, Chief Executive Officer of Schneider Electric, commented: “This acquisition
significantly reinforces our building automation business unit. Pelco systems will integrate gradually
in our Power and Control solutions for buildings and infrastructure. Security offers a highly attractive
growth profile and video is becoming the key application in the building management market.”

Transaction Overview
The price to be paid for Pelco is $1,220 million expressed as an enterprise value on a cash-free
debt-free basis. In addition, Schneider Electric will pay to the sellers the net present value of a tax
benefit resulting from the step-up of Pelco’s assets, representing $320 million. As a consequence,
the total price paid in cash at closing will be $1,540 million. The company had a net debt of roughly
$139 million at 30 June 2007.

This transaction is expected to be accretive to EPS from year 1 and the ROCE to cover
Schneider Electric’s cost of capital in year 3, in accordance with the Group’s acquisition criteria.
The transaction is subject to anti-trust and other regulatory approval and is expected to close by
October 2007.

  1. August 1, 2007 at 11:14 am

    I wonder how long it will be until Schneider makes Pelco cut some of its expenses; i.e the Pelco jet, lavish benefits for employees, charitable and public relations activities, etc.
    I can’t think of an example when a privately or closely held security manufacturer was made better after a buyout by a large corporation. GE in particular did a great job of ruining most of the smaller companies (Kalatel, Sentrol, etc.) that it acquired.

  2. August 1, 2007 at 8:20 pm

    Good point, Michael. Pelco is known for its lavish attention to large customers and to charitable causes, too.

  3. paul gref
    August 2, 2007 at 6:37 am

    nice job finding this out prior to the announcement.
    “Pelco’s unique(i think they mean they have no clue what the position is?) position in IP-based video security represents a
    tremendous additional organic growth opportunity”

  4. Tim
    August 3, 2007 at 9:46 am

    Does this mean they’ll stop the skits?

  5. syd
    August 17, 2007 at 2:45 am

    I have watched Pelco over the last 7 years during their “real growth period” and its a real shame to see them giving in to the corporate global giants.
    They have a marketing engine second to none, have the customers on-side and have sensational products but alas the worlds largest CCTV manufacturer will never be the same…
    BTW sold out to the French?
    Unfortunatly they will never be the same once all of its good points are “trimmed” or “hacked” off in the name of saving money for the shareholders

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