LONDON (Reuters) - France's Schneider Electric is combining its software operations with Britain's Aveva to create a business active in sectors ranging from nuclear power to pharmaceuticals.
Schneider will pay 550 million pounds ($858 million) towards the issue of new shares in Aveva, a company that designs shipping, industrial plants and nuclear power stations. It will take a 53.5 percent stake in the enlarged company.
"This deal has a clear and compelling industrial logic," said Aveva's chief executive Richard Longdon, who will remain in charge of the group.
"(It) will diversify Aveva's end markets, significantly enhancing its position in oil and gas, power and marine, but also adding a big presence in other verticals including chemicals, food and beverage, mining water and pharmaceuticals."
Shares in Aveva, which was founded in 1967 as a spin-off from Cambridge University, jumped to a four-year high of 2,344 pence on Monday morning, and they were trading up 25 percent at 2,230 pence at 0940 GMT.
Shares in Schneider Electric, a much bigger group with annual revenues of 25 billion euros ($27 billion) last year, were trading up 0.80 percent at 64.41 euros.
The deal will more than double the size of Aveva, giving it annual revenue of about 534 million pounds and adjusted earnings of about 130 million pounds.
It will also see former assets of Britain's Invensys, bought by Schneider two years ago, united with Aveva.
Longdon said Schneider had decided to structure the deal as a reverse takeover rather than the straight acquisition that had been mooted in media reports to retain more flexibility to make further acquisitions.
"There was not an offer on the table to buy the business outright," he said.
The merged business will retain its listing on the London Stock Exchange. Aveva's shareholders will get a cash payout after the share issue.
Analysts at Investec, who upgraded Aveva to "Buy" as a result of the deal, said it had many merits.
"It should (...) materially diversify Aveva's geographic and vertical exposure and so come at an opportune time for the business, which was suffering for its high exposure to oil and gas," they said.
(Reporting by Paul Sandle; editing by Kate Holton and Keith Weir)