Carlyle and PAI in $900m technology deal

The Schneider Electric carve-out will be the first investment from PAI's new Europe VI fund

The Carlyle Group and PAI Partners have entered into exclusive talks with French-based Schneider Electric to acquire its business unit Custom Sensors & Technologies, according to a statement.

Financial details of the transaction were undisclosed, but it is understood the pair will pay about $900 million for a majority stake in the business.

Schneider Electric will invest $100 million alongside Carlyle, PAI and CST management to retain a 30 percent stake.

US-based CST was created in 2006 as a business unit of Schneider Electric following several acquisitions made between 2000 and 2006. It is focused on the growing market of “mission-critical” sensing products and has expertise across a mix of diverse product areas and end-markets, including the industrial, aerospace and transportation sectors, according to the statement.

In 2013, CST generated sales of $600 million. It has approximately 4,500 employees in more than 30 countries.

Carlyle will use its Carlyle Europe Partners IV (CEPIV), which is currently in market to raise €3 billion, according to Private Equity International’s Research and Analytics division. This would be the first investment from that vehicle.

Paris-based PAI will, for the first time, use capital from its new fund, PAI Europe VI. The vehicle, which is looking to raise €3 billion, held a €1.4 billion first close in January.

“We see this as a great opportunity to create further value in the company, leveraging Carlyle Europe Partners’ significant experience in managing complex carve-out transactions for industrial diversified businesses and Carlyle’s significant track record in partnerships with large corporates, especially in France,” Jonathan Zafrani, a managing director for Carlyle Europe Partners, said.

“This transaction is the result of many years of hard work, and constant dialogue with Schneider Electric and CST,” said PAI partner Laurent Rivoire. “We are very excited to support, through PAI’s financial and operational capabilities, the CST management team in its ambition to accelerate growth, including through acquisitions.”

The offer remains subject to consultation with the French employee works councils, with the final negotiations due to take place after that.