SCHNEIDER ELECTRIC
Long Idea
- The deal with ISYS ends tonight, and the market is generally rewarding acquirors – as seen in MCK (down post CLS1 break) and AMEC (up post the preconditional bid for FWLT)
- Recent headlines such as “Sick Man Of Europe” is misleading in terms of construction. See chart below. Shows construction PMI bottoming after q1 2013 and since then is on an upward trajectory..Close to breaking above 50 again.
- SU actually only derives 29% of its revenue from Western Europe anyway, and this deal also diversifies SU’s exposure geographically even more
- French manufacturing figures a lot better than expected in Nov +1.3% MoM and 1.6% YoY – highest since Nov 2011
- Hollande streamlining construction approval process from 8 months to 5 mths
- The ISYS/SU spread has been very tight all along, with decent SU volumes, indicating that the stock has been pressured as people have set up the spread, particularly in the back end (recently)
- SU has underperformed the CAC by 1% since the deal was announced; underperformed the CAC industrials index by almost 8% over the same time period; underperformed SGO FP by 11% since deal announcement
- Time to BUY
