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					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                Over the last months, the
  defined growth platforms               Group has deployed its
                                         strategy by acquiring:
      Specific segments
         – 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                                      2 000
               Micro-Motors                                      9 000
              Integ. Products
                   HMI                                           1 000
                 Control                                         1 000


                 Sensors                                         9 000
              Power Protect.                                     1 000

                SE/ROC
                New Offer                                       23 000


 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)
                                                                                            5%
                                                 While the Sensors total growth of sensors is
                                                 the growth for automotive sensors is7.5% and besides,
                                                 electronic sensors are replacing electro-mechanical ones
                             Commercial &
      Total Sensors        Semi-Pro Repetitive
       Market                  Machines

                           • Vehicles
                                                       Selected
                           • Aircraft
                                                       Sensors
                           • Medical                    Types
      - Process control
                           • Consumers
      - Repet.OEMs                                • Position
                           • Small HVAC                                   • Automotive      • Others H&M-Q
      - Machine Contro                            • Speed/Acceler.
                           • Office Auto                                    • OEMs            & Spec. OEMs
                                                  • Pressure
      - Building Autom .   • Telecom                                     • Cars, Trucks     • Aero, Trains
                                                  • Thermal
                           • Others…..                                   • Off-Road         • Marine, OA,
                                 $21Bn            • Flow
            $35Bn                                        $10Bn                $5Bn            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         They are used in all sectors in a lot of different
                                                              applications
5                                                  1998
                                                   2008            Embedded : Automotive (On Road Vehicles),
4                                 Intechno Study
                                                                    Off Road Machines, Trains, Aerospace

3                                                                  Appliance, Medical, Industrial, HVAC, Office
                                                                    Automation, Building Automation
2
                                                           Increase of the number of sensors per
1                                                             “machine” around +5% per year

0                                                          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

                                                        Engine and
General Industrial   HVAC/R   Aerospace / Military   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


            Ebit from cost synergies $5m
TARGET      Ebit from revenue synergies $5m

                                                                              13
Appendices



             14
     Components for Repetitive Machines

                                                 Automatic
                                                           Speed = 2500
                             Control            Conveyor   Temperat . = 175°C
                                                           CSetting = 180°C
Switches/Sensors
                                                     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
                                                              Single Chip Micro-Marchined                                                    Electromechanical
                          Ceramic Capacitive                                                               Piezoresistive
                                                                        (MEMS)                                                                 (LVDT / RVDT)


                                                                                                                                                 19%
                                                                                                          6%
 Current                                  49%
     product mix                                                        26%



 Characteristics        Low to medium pressure                  Low pressure absolute              Low to medium pressure gage       High accuracy/reliability
                         Absolute and gage                       Differential pressure                                                 Harsh environment
                         Differential pressure

 Applications           Occupant detection                      Emission control, AC, ABS          Direct injection                  Aerospace: flight control
                         Engine oil                               systems, tire pressure              gasoline/diesel, ABS brakes,       actuator, servos, stick
                                                                  MAP, HVAC, compressor               oil pressure                       controls, engine controls
                         Exhaust Gas Recirculation
                                                                                                      General industrial                Industrial power generation:
                                                                  Blood pressure
                         Diesel filter trap                                                           instrumentation application        robotics, actuators
                                                                  Aerospace pressure control
                         Turbo boost                                                                                                    Automotive applications

 Competitors            Texas Instruments                       Motorola                           Bosch                             Lisk
                                                                  Denso                              Delphi                            Penny & &Giles
                                                                  Texas Instruments                  Denso                             GL Colins
                                                                  Bosch                                                                 MPC

 Features & future       Tried and tested technology            Most recent technology             Most recent technology            High quality
                          Suitable for hostile environment       High volume with standardised      Competitive for high volume       Low volume with high level of
                          High volumes with                       features                            with standardised features         customisation
                           customization or low volumes           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   30.8
  % of sales    19.7%
  Operating
                16.5
   income
  % of sales    10.6%



                        17

				
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