Schneider Electric is buying the US sensor and encoder manufacturer BEI Technologies in a deal which values BEI at $562m. Schneider predicts that the acquisition will double the size of its customised sensors business to around $600m and generate $25m of extra income by 2010.

BEI is expected to generate a profit of $28m this year on sales of $326m. The Californian company, which employs around 1,700 people, has a portfolio that includes rotary optical encoders (sold under the Ideacod and IED brands), motors and voice coil actuators (Kimco), position sensors (Duncan) and inertial sensors. Late last year, it bought the UK digital readout and linear encoder specialist, Newall Measurement Systems.

A big attraction for Schneider is BEI`s strong presence in the $10bn customised sensors market, which is growing at an estimated 7-8% per annum. This sector accounts for 83% of BEI`s business, followed by automation and control sensors (14%) and electrical actuators (3%). Schneider`s chief executive Henri Lachmann describes the BEI acquisition as "a breakthrough for our customised sensors platform".

Since 1997, BEI has been growing at compounded annual rate of 15%. Almost half of its business (49%) is in North America with 40% coming from Europe. Its biggest end-market is transportation (58%), followed by industry (23%) and aerospace/defence (19%). It is particularly strong in electronic stability control products, with an estimated 40% share of this market.

Schneider says that the new acquisition fits in well with its earlier acquisitions, Crouzet Automation and Kavlico, which produce position sensors. According to Lachmann, BEI offers "significant potential for cross-fertilisation" with these operations. "We are confident," he adds, "that our platform will now benefit from critical size, and have the ability to set the standards in the attractive customised sensors market".

BEI`s chairman and chief executive, Charles Crocker - who holds almost 20% of BEI`s shares - predicts that the combination of BEI and Schneider "will establish a strong platform that will create significant new opportunities to accelerate sales and marketing, technology, research and development, and expansion of sensor-based products in the marketplace".

BEI has been investing about 5.2% of its turnover in r&d and is developing a new generation of gyro sensors and other products for vehicle applications.

Schneider`s takeover of BEI is expected to be completed by the fourth quarter of this year.