The Invensys Saga
Australia-based Automation.Industry-News.Net, July 2005
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Invensys was formed with the January 1999 merger of two leading British companies, Siebe and BTR.
Arrival of Allen YurkoSiebe was a relatively unknown, old-line British company attempted growth though acquisition of mid-sized U.S. industrial automation companies like Barber-Colman and Robertshaw. Allen Yurko came with Robertshaw as a bean-counter and through his financial acumen and leadership he quickly moved up to become CEO. He achieved prominence for Siebe through the bold acquisition of Foxboro, one of the largest (but financially ailing) U.S.process-control companies. After this, under Yurko’s leadership, Wonderware (PC software) and then Eurotherm (temperature controls and drives) were acquired at a heady price, figuring that they’d be catalysts for consolidated growth.
Yurko and Marshall - "pig-in-a-poke"When results continued to slide, Yurko agreed to merge Siebe with BTR (acronym for the quaint name British Tyre & Rubber). This was an even bigger hodgepodge of acquisitions (Hawker Siddeley, APV and others). Yurko was named CEO and the combination was one of the largest in British history, with a new name – Invensys. But the innovative name could not hide underlying poor performance. Pig + pig = more pigs.
Results continued to decline and the bull-headed Yurko sought to fix the problems with a gutsy move. He bought Baan for about $ 1b in cash (mostly debt). At its zenith, the ailing Dutch software company had a market-cap of almost $10bn. It was eventually sold for about $125m as part of a fire-sale to pay off the debt burden the company had been saddled with under Yurko’s watch.
Invensys’ share price had been at nearly 400p when companies like Eurotherm and Wonderware were acquired just 2-3 years before. The stock was trading at about 10% of that price when Yurko was exited in Oct. 2001. As CEO, he had put Invensys into a debilitating, downward spiral, leaving the company with serious cash-problems and troublesome loan covenants. He departed with the dubious distinction of reducing some of the great names in British engineering to the muddle that is now Invensys.
Haythornthwaite hailedThe Invensys board included Lord Marshall, who had come with BTR and had instigated the downfall by drawing Siebe and Yurko into his mess. Under his direction, Rick Haythornthwaite was appointed Chief Executive in 2001. Then just 45, Haythornthwaite had no related experience, other than having sold off a cement company at a better-than-expected price. He was hailed as a savior. But how could he have realized some shareholder value out of this sorry tale? A break-up of the business would certainly be tempting were it not for the fact that, as one British analyst suggested, “prices would be of the knacker’s yard variety”.
Within a respectable (for the British) timeframe, Lord Marshall was retired about a year later. With Yurko, he undoubtedly shares the blame for the Invensys debacle.
With the banks breathing down his neck, Haythornthwaite decided to sell off the most profitable two-thirds of Invensys – because they would fetch better prices. Remaining were just Production Management (Foxboro, Wonderware and related companies) plus Rail Systems (to maintain the glitter of a recent big contract).
Beyond £2.6B of disposals (selling off some profitable pieces) and a hugely expensive £2.7B refinancing, Haythornthwaite had simply dragged the once mighty Invensys into further decline. He was clearly out of his depth in the fragmented industrial automation business and presided over the downfall of a once mighty multi-billion business as it was kicked off the UK FTSE-100 big-cap list with barely a whimper.
Rick retires - Ulf in chargeAfter Invensys announced widening losses for the year 2004 (ending March 31, 2005) Haythornthwaite finally threw in the towel. The stock was now trading at about 10p, some 3% of its former value, matching the decline of any dubious dotcom. For the stable industrial automation business this was indeed a disaster!
The ailing Invensys is now in the hands of Ulf Henriksson, the hired-gun who came from Eaton in 2004. The new CEO is more hands-on, and hopefully has a better chance of turning things around. Other than being called "Hatchet-man Henriksson" by fearful and tearful employees as he prunes and tunes, he seems to be working diligently to put the business back on track. We wish him well. And we hope the good employees of Invensys have better luck than they've been having of late.
Whither Invensys?These days, most automation companies are doing much better than they have of late. It remains to be seen whether or not Ulf will improve results enough to keep Invensys independent. More likely, any up tick will simply fetch a better price from the buyers who are now sitting on the sidelines. Siemens, Emerson, Schneider, GE – there are very few farmers large enough to handle a pig of this size.
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