UBS raises Aveva target price, says Schneider deal looks "sensible"

21st Jul 2015 11:56

(ShareCast News) - UBS raised its price target on Aveva to 2,600p from 2,210p following news that the company has agreed a reverse takeover by Schneider Electric.It said the proposed deal looks sensible and there should be cross-selling opportunities created, although it expects cost saving opportunities to be modest."While FY 2016 is likely to be a tough year for both Aveva and Schneider Software, if we assume 5% growth in FY 2017 for the pro-forma business and some margin expansion (200 basis points) as a result of cost efficiencies, we can anticipate a business with an EBITA of nearly £150m, compared with £64m in our current model," the bank said.It noted that the deal is unlikely to complete before the end of calendar 2015 and said it does not expect to see any anti-trust issues."Applying the 21x to Aveva's 2017 estimated earnings, adding Schneider at book value (an implicit 19x) and taking account of cash returns gives a 2,600p price target," said UBS.It rates the stock at 'buy'.At 10:56, Aveva shares were up 1.2% at 2,282p.