AI Leader Schneider Electric Strikes $23B Software Deal at Decade-Low Valuation

Schneider Electric (SU) agreed on Monday, Oct. 5, to buy PTC (PTC), the Boston-based industrial-design software company, for $205 a share in cash, a deal valued at $23 billion. The price is a 42% premium to PTC's closing price on Friday, Oct. 2.

PTC shares jumped 35% to nearly $195 in early New York trading. Schneider's stock fell 10% in Paris.

A buyer from the AI boom, a target priced for AI risk

The two companies sit on opposite sides of the market's view of artificial intelligence.

Schneider, a French maker of electrical equipment, has benefited directly from the AI build-out, because its products are in heavy demand for data centers. Its total return over the last three years is 90%, against 23% for France's CAC 40 index as a whole, according to FactSet. It also trades at nearly double the valuation of the typical CAC 40 stock.

PTC is a software company, a group whose stocks have been held back by concern that AI tools could disrupt their business. Its valuation fell as low as 13.1 times expected earnings for the next 12 months at one point this year, according to FactSet. MarketWatch described the deal price as a decade-low valuation for PTC.

Analysts at Jefferies, led by Lucas Ferhani, tied the two together. "AI disruption fears are still weighing on software valuations, which allows acquiring PTC at a decade-low valuation but could still weigh on [Schneider] post deal," they wrote.

Why Schneider shares fell

Schneider said PTC's software complements its own industrial AI-data foundation. Investors were not persuaded on Monday, and MarketWatch and Jefferies pointed to two issues.

The first is the price on Schneider's own terms. The company said the deal is valued at 13 times earnings once synergies are included. Most of those synergies, however, are projected revenue gains, which are typically harder to achieve than cost savings, because they depend on selling more to customers rather than on cutting expenses the buyer controls.

The second is the business Schneider is taking on. It has been valued as a beneficiary of AI spending. The Jefferies analysts warned that the same disruption concerns that made PTC cheap could weigh on Schneider once the deal is done.

The read-across to other software stocks

The deal lifted other industrial and design software makers in early U.S. trading, on hopes that they too could become takeover targets. Procore Technologies (PCOR), which makes construction-management software, rose 7%, and Autodesk (ADSK) gained 5%. Analysts at Stifel said Procore was the more "digestible" of the two for a potential acquirer.

PTC's discount to the $205 offer

• The gap between PTC's trading price and the $205 offer. In early trading the stock sat below the offer price, a discount that reflects the time and risk involved before a deal closes.
• Details from Schneider on the timing, approvals and financing of the acquisition, which the initial report did not include.
• Whether Schneider shares recover as investors weigh the revenue synergies against the price.
• Further deal activity among software companies whose valuations have been pressured by AI concerns, including the names that rose on Monday.