Goldman Sachs upgrades Aveva to 'neutral' on Schneider deal

Goldman Sachs upgraded Aveva to 'neutral' from 'sell' and lifted the price target to 2,400p from 1,850p following news it will be bought by French industrial group Schneider Electric.

GS said the deal has brought the strategic appeal of Aveva's PLM software to the forefront again.

"As software becomes an increasing source of innovation and differentiation, industrial and capital goods companies are both organically developing and also actively carrying out software M&A. We reflect our greater conviction of Aveva’s strategic appeal in our valuation; with our new 2,400p 12m price target indicating limited downside, we upgrade the stock."

The bank noted that since being added to its 'sell' list in January 2016, the shares are up 80% versus the FTSE World Europe up 34%, reflecting a positive reaction to the Schneider deal.

"While we don’t take a view on the likelihood of the deal completing, we believe the merger would result in a company with more scale and a broader footprint of offerings spanning process industry CAD and manufacturing/automation systems," GS said. It added that the combined offering wouldn’t address the full stack of offerings, but it would result in increased scale in North America.

Aveva announced earlier this month that it would merge with Schneider Software in the form of a reverse takeover. Aveva shareholders will receive a total cash consideration of £650m and on completion, Schneider will own 60% of the combined entity.

At 1040 BST, Aveva shares were up 1.3% to 2,445p.