German SGB in talks to merge with Schneider Electric unit, say sources: Reuters

Germany’s SGB-SMIT is in talks to merge with the power transformer unit of French electrical components maker Schneider Electric (SCHN.PA), two people familiar with the plans told Reuters.

Talks are at an advanced stage, the people said, adding any deal would see Schneider take a minority stake in SGB-SMIT, owned by private equity group BC Partners since 2008.

“Chances are 50:50,” one of the people said.

BC Partners also continues to explore a sale of the business and last year hired Goldman Sachs (GS.N) to find a possible buyer, hoping to fetch 700 million euros ($746 million).

In case of a merger with Schneider’s power transformer business, BC Partners would remain invested in SGB-SMIT before pulling out at a later stage, for example via a public listing, the people said.

SGB-SMIT generated sales of 720 million euros in 2016, an increase of 8 percent, while core earnings (EBITDA) rose to about 80 million, based on preliminary results, up from 64 million in 2015.

A merger with Schneider’s transformer business could raise EBITDA to more than 110 million euros, the people said.

BC Partners, Schneider and Goldman Sachs all declined to comment.