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Exclusive: Schneider nears $5 billion Invensys deal - sources

By Sophie Sassard and Soyoung Kim

LONDON/NEW YORK (Reuters) - France's Schneider Electric is nearing a 3.3 billion pound ($5.07 billion) deal to acquire British engineer Invensys and could announce it at its results on Wednesday, three people with direct knowledge of the matter said.

The structure of the share and cash deal is expected to remain "roughly" the same as the one initially presented earlier this month as no other bidder has emerged to challenge Schneider's bid, said the people who asked not to be named because the talks are private.

Schneider previously said it would pay 505 pence a share with 319 pence in cash and 186 pence in new Schneider shares.

Invensys had said it was likely to recommend such an offer, which would represent a 15 percent premium to the stock's close when the announcement was made.

A hedge fund manager owning Invensys shares said he still saw a 10-15 percent chance that a rival bidder could come in even after a potential announcement tomorrow, with U.S. rival Emerson the most probable candidate.

This investor, who declined to be named because of the sensitivity of the matter, estimated that only around 10 percent of the stock was currently owned by hedge funds.

Recent collapsed deals, such as those involving Severn Trent and TNT Express , has prevented some hedge funds from taking large stakes in Invensys.

The hedge fund manager added that there was also some uncertainty over a looming antitrust review in China where Invensys operates in the nuclear industry. Invensys' pension liability of about 4.2 billion pounds ($6.41 billion) could also weigh on the deal although it is unlikely to constitute a dealbreaker, the investor said.

Invensys, which produces software that helps to run power stations, oil refineries and chemical plants, has long been mooted as a takeover target in an industry dominated by larger rivals, particularly after the disposal of its rail business last year to strengthen its balance sheet and pension fund.

Its reorganization after the rail disposal is on course to deliver cost savings of 20 million pounds during the current financial year and a further 5 million pounds the following year. This, as well as growth in its higher-margin software division, is expected to boost performance for the year.

Schneider and Invensys declined to comment.

(Additional reporting by Anjuli Davis in London and Elena Berton in Paris; Editing by Steve Slater, Jane Merriman and Louise Heavens)

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