Schneider Electric Acquires Motivair for $850 Million, Boosting AI Cooling Solutions

Schneider Electric shares rise as it acquires Motivair for $850 million in cash By Investing.com

Investing.com -- Shares of Schneider Electric (EPA:SCHN) rose following the company's announcement of its acquisition of a controlling interest in Motivair Corporation for $850 million. At 8:54 am (1254 GMT), Schneider Electric was trading 3.8% higher at €247.85. Motivair, headquartered in Buffalo, New York, is an advanced liquid cooling solutions provider, particularly for high-performance computing systems. Founded in 1988, Motivair specializes in various cooling technologies, including Coolant Distribution Units, Rear Door Heat Exchangers, Cold Plates, and Heat Dissipation Units, all of which are crucial for managing thermal challenges in modern computing environments. "We believe the demand on liquid cooling for AI data centers should sustain for the following 5-10 years, driven by continuous iteration of AI chips and rising heat dissipation requirements," said analysts from Jefferies in note. By acquiring Motivair, Schneider Electric aims to boost its portfolio of liquid cooling technologies, enhancing its capacity to address the thermal management needs of data centers and AI customers. The transaction, which involves Schneider Electric buying an initial 75% interest in Motivair, is expected to close in the coming quarters, pending regulatory approvals. "We estimate the acquisition will add 3% to Schneider's overall data centre sales," said analysts at Morgan Stanley (NYSE:MS) in a note. It is anticipated that Schneider Electric will acquire the remaining 25% of Motivair in 2028. Schneider Electric's position in the data center and networks sector has been a growth driver, representing 21% of the company's orders in the previous fiscal year. "Overall from a strategic standpoint, we view this acquisition as a good fit," said Morgan Stanley. The company has seen growth in this market, with double-digit annual increases in sales since 2017. "Considering the liquid cooling solution is more cost-efficient to the whole data center, we forecast the global liquid cooling TAM to rally from USD997m in 2023 to USD27.8bn in 2030E, representing a 61% CAGR," Jefferies said.

Schneider Electric powers up with $850M liquid cooling deal

Snags controlling stake in Motivair Corporation, rest to come by 2028 Schneider Electric is taking a controlling interest in Motivair Corporation, a specialist in liquid cooling and thermal management tech for high-performance computing (HPC) systems. Under the terms of the purchase, Schneider Electric is buying a 75 percent controlling interest in Motivair for an all-cash transaction of $850 million, and intends to buy the rest later. The acquired biz will slot into Schneider Electric's Energy Management division which houses direct-to-chip liquid cooling and thermal technologies. French HQ'd Schneider Electric has long served the datacenter market with electrical distribution, UPS kit, racks, and enclosures, and says that while liquid cooling is not a new per se, its application inside bit barns is "a nascent market" that it expects to swell. This is in no small part due to trends such as generative AI and the introduction of large language models (LLMs), which Schneider acknowledges are catalysts driving greater power requirements. "This shift to accelerated computing is resulting in new datacenter architectures requiring more efficient cooling solutions, particularly liquid cooling, as traditional air cooling alone cannot mitigate the higher heat generated as a result," Schneider said. Cooling already accounts for circa 40 percent of the power needed to run a datacenter, according to Digital Realty, and this is only going to grow due to AI. According to Goldman Sachs, AI will fuel a 160 percent rise in the power demands of bit barns by 2030. Liquid cooling is understood to be more efffective for high denstity server farms than air cooling, though they can consume more water, be environmentally unfriendly and more costly to set up. Based in Buffalo, New York, Motivair has a background in fitting supercomputers with liquid cooling tech. Motivair president and CEO Rich Whitmore reckons the takeover will help it scale operations and invest in new technologies. The $850 million transaction is subject to customary closing conditions, including gaining required regulatory approvals, and is expected to close "in the coming quarters." Schneider says it hopes to buy the remaining 25 percent of Motivair by 2028.