Invensys buys Baan in move to link customers to the shopfloor

Automation and control group Invensys is to buy troubled Dutch management software specialist Baan for £474m, in an attempt to bridge the gap between e-business and the production line. Invensys, formed by the merger of BTR and Siebe last year, plans to merge loss-making Baan’s expertise in enterprise resource planning software with its factory automation […]

Automation and control group Invensys is to buy troubled Dutch management software specialist Baan for £474m, in an attempt to bridge the gap between e-business and the production line.

Invensys, formed by the merger of BTR and Siebe last year, plans to merge loss-making Baan’s expertise in enterprise resource planning software with its factory automation technology to create a single supply source for integrated industrial systems.

The bid won the backing of Baan’s board despite the planned tough rationalisation programme for the merged company. This will see a 13% reduction in the workforce to 12,500, and 35 plant closures, which should achieve cumulative savings of £300m by 2001/02.

Invensys promised to take the Dutch company, which lost £140m last year, into the black within a year.

The merger will create a new software and systems division, which will have annual sales of £1.3bn. It will be headed by Bruce Henderson, chief executive of Invensys’s intelligent automation division.

Henderson claimed the new division would meet a so-far unmet industry demand. `This area is wide open at the moment,’ he said. `Other companies say that they can do it, but we know they can’t because Invensys has 400 factories serving the world’s largest process customers. We know this business very well and know how to fill this void.’

A new software system – probably called LeanWare – linking customer consumption in real time to suppliers’ production systems via the web, should be available within 12 months, Henderson said.

The City reacted cautiously to the move, and Invensys’ share price fell 26.5p in early trading on Wednesday.

Nick Hyslop, an analyst at Dresdner Kleinwort Benson, said: `This is a big, bold, somewhat risky step, and the City likes security. The issue is whether in five years’ time industry will be about web-based transactions linked to automated manufacturing producing just-in-time – or will it remain as it is now? The market is just not sure.’

The deal accelerates Invensys’ flight from traditional engineering to what it terms integrated technology through acquisitions and divestments.

Chief executive Allen Yurko said further purchases would follow: `To complement underlying growth we are also pursuing strategic acquisitions to further build our global market share.’

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