Schneider Electric Expands In
Sensing Technology
Paris, March 25, 2004
Strategy background: Components for repetitive machines OEMs
The Sensors Market
Kavlico
The Transaction
Synergies
2
Our acquisition strategy
 Schneider Electric has
defined growth platforms

Specific segments
 Over the last months, the
Group has deployed its
strategy by acquiring:
– Industrial automation
 Digital Electronics: December 2002
– Components for repetitive
applications
 Kavlico: March 2004

Building automation
 T.A.C: August 2003

Residential market
 Clipsal: December 2003

Secured power
 MGE UPS: February 2004

Value-added services: energy,
industrial productivity
 T.A.C, MGE UPS
3
Strategy Background
 The “Components for repetitive machines» business is one of the “growth
platforms” identified by Schneider Electric

These activities are close to the traditional SE Activities (in Automation and partly in
Electrical Protection)
– Products have similar functions for Control, diagnosis and display
– Products are highly industrial
– Customers are OEMs and their tier suppliers
 This market is a new opportunity for Schneider :

Adapted or Specific Products for a “One-to-One Business”

These products are not easy to design and manufacture by a standard products
supplier

The major characteristics of a components supplier for repetitive machines are its
technologies and its ability to understand the requests of the customers and to design
quickly the right answer

The manufacturing volumes are large enough to reach the lowest costs and to use
these products in several applications and segments with competitive advantages
4
Strategy Background
 The accessible market is large with an interesting growth (6 to 8%)

supported by the increasing need into repetitive machines or equipments in the
industrial, semi-commercial and commercial markets

Increase of controls and diagnostics by microprocessor leads to a significant
potential of development for electronic devices in opposition to traditional
electromechanical products
 In this market, components suppliers are very numerous, generally
national (or regional) and small, giving then a fragmented competition
 Crouzet showed the opportunity to go into this market with a special
Business-Model and adapted /specific products
5
Strategy Background
 This market is led by specialized players with a product (instead of business) focus
Medium/High Quantity OEMs
Crouzet
Offer
M$ Market
Micro-Switch
Micro-Motors
Integ. Products
2 000
HMI
1 000
Control
1 000
Sensors
9 000
Power Protect.
1 000
SE/ROC
New Offer
23 000
9 000
 Schneider Electric is already present inside this market :

CROUZET Automation (€ 160m of turnover)
6
Strategy Background
 « Sensors » are one of the key elements of repetitive machines
and our intent was to acquire major players in this business
 KAVLICO was a very attracting target in the Pressure and Position
Sensors business
7
Sensors Market
 From a $35bn Sensors Total Market, $21bn are sold to Repetitive OEMs and, considering
the types we can focus on, the accessible market for Schneider Electric is $10bn
 The studies we worked with indicate 50% roughly are going to the Automotive market
(Embedded products)
While the Sensors total growth of sensors is5%
the growth for automotive sensors is7.5% and besides,
electronic sensors are replacing electro-mechanical ones
Total Sensors
Market
Commercial &
Semi-Pro Repetitive
Machines
- Process control
- Repet.OEMs
- Machine Contro
- Building Autom .
• Vehicles
• Aircraft
• Medical
• Consumers
• Small HVAC
• Office Auto
• Telecom
• Others…..
$21Bn
$35Bn
Selected
Sensors
Types
• Position
• Speed/Acceler.
• Pressure
• Thermal
• Flow
$10Bn
• Automotive
• OEMs
• Others H&M-Q
& Spec. OEMs
• Cars, Trucks
• Off-Road
$5Bn
• Aero, Trains
• Marine, OA,
Medic., Hvac
$5Bn
$10Bn
8
Sensors Market
 Among all types of sensor, pressure sensors
$ Billion
are in the 1st priority group
6
Priority 1
Priority 2
Priority 3
applications
5
4
3
2
1
0
 They are used in all sectors in a lot of different
1998
2008

Embedded : Automotive (On Road Vehicles),
Off Road Machines, Trains, Aerospace

Appliance, Medical, Industrial, HVAC, Office
Automation, Building Automation
Intechno Study
 Increase of the number of sensors per
“machine” around +5% per year
 Increase of Pressure Sensors

Machining and Automation
+1.8%

Process Control
+ 4.2%

Automotive and Repetitive
+ 7.5%
9
KAVLICO
 The company has been founded in 1958 and generated profits every year. It
was independent until November 2000 then bought by C-Mac which merged
with Solectron Corp. in 2002
 Turnover : $156m in automotive (36%), off-road/diesel engine (21%),
aerospace (24%) and industrial (19%). Marketing through direct sales for
automotive / aero and through reps and distributors for industry / commercial
 Headcount : 1 300 employees
 3 Sites

Moorpark, CA for HQ, manufacturing, warehouse (28 000 m²)

Southfield, MI for sales and marketing

Minden in Germany for European sales and support, light manufacturing (2 500 m²)
10
KAVLICO
Examples of Products
General Industrial
HVAC/R
Aerospace / Military
Engine and
Industrial Vehicles
Fluid Power
11
The transaction
 Payment of $195m in cash for 100% of Kavlico’s shares on a
debt-free / cash-free basis.
 11,7 X estimated 2004 EBITA
12
Synergies
 Commercial synergies



Make Crouzet benefit from Kavlico’s position on US Aerospace and
Automotive markets
Make Kavlico benefit from Crouzet’s position on European Aerospace and
Automotive markets
Reach critical mass to increase our presence in this business in Asia
(Research of Asian partners)
 Cost synergies


Share common back-offices
Make Kavlico benefit from Schneider Electric purchasing conditions
 Technical synergies

Share R&D expertise between Crouzet, Schneider Electric and Kavlico
TARGET
Ebit from cost synergies $5m
Ebit from revenue synergies $5m
13
Appendices
14
Components for Repetitive Machines
Automatic
Control
Switches/Sensors
Conveyor
Speed = 2500
Temperat . = 175°C
CSetting = 180°C
F1 F2 F3 F4
Machines
Limited
Cabling and
Connectors
User Machine Interface
ON
OFF
Powering &
Protection
Power
Supply
Geared Micro-Motors
15
KAVLICO : Technologies Mastered
Ceramic Capacitive
Single Chip Micro-Marchined
(MEMS)
Electromechanical
(LVDT / RVDT)
Piezoresistive
19%
 Current
6%
49%
product mix
 Characteristics
 Applications
 Competitors
 Features & future
26%

Low to medium pressure

Low pressure absolute

Absolute and gage

Differential pressure

Differential pressure

Occupant detection


Engine oil
Emission control, AC, ABS
systems, tire pressure

Exhaust Gas Recirculation

MAP, HVAC, compressor

Diesel filter trap

Blood pressure

Turbo boost

Aerospace pressure control

Texas Instruments

Motorola


Denso


Texas Instruments


Bosch

Low to medium pressure gage

High accuracy/reliability

Harsh environment

Direct injection
gasoline/diesel, ABS brakes,
oil pressure

Aerospace: flight control
actuator, servos, stick
controls, engine controls

General industrial
instrumentation application

Industrial power generation:
robotics, actuators

Automotive applications
Bosch

Lisk
Delphi

Penny & &Giles
Denso

GL Colins

MPC

Tried and tested technology

Most recent technology

Most recent technology

High quality

Suitable for hostile environment

Competitive for high volume
with standardised features

High volumes with
customization or low volumes
High volume with standardised
features


Low volume with high level of
customisation

Around 35% of product mix

Around 10% of product mix

Around 20% of product mix

Around 35% of product mix
Sensors solutions for the automotive and industrial industries
Aerospace industry
16
KAVLICO Key Figures
(in USD M)
2003
Sales
156.1
Gross Margin
% of sales
30.8
19.7%
Operating
income
% of sales
16.5
10.6%
17