Emerson sweetens bid for Rockwell Automation to $29 billion

NEW YORK: US industrial automation equipment company Emerson Electric Co raised its cash-and-stock offer to acquire Rockwell Automation Inc to $29 billion on Thursday, ratcheting up pressure on its smaller peer to engage in deal talks.
The new offer follows Rockwell’s rejections of Emerson’s overtures for much of this year. Rockwell’s CEO Blake Moret said last week he wanted to stick with delivering the company’s factory automation equipment on one platform.
“As it did with Emerson’s prior proposals… the board of directors of Rockwell Automation will carefully review Emerson’s proposal to determine the course of action that it believes is in the best interest of the company and Rockwell Automation shareowners,” Rockwell said in a statement on Thursday.
Rockwell shares were up 4.7 per cent at $197.57. Emerson shares were up 0.2 per cent at $59.25, giving the company a market capitalisation of $38 billion.
Milwaukee, Wisconsin-based Rockwell said last month it had rejected a $215-per-share bid from Emerson, split in half between cash and shares.
On Thursday, Emerson said its new $225-per-share bid would be split between $135 per share in cash and $90 per share in Emerson shares.
“We do think it is a compelling offer for the company, given the increase in overall bid and increased cash component,” Stifel analysts wrote in a note.
Emerson offered to name the combined company Emerson Rockwell and maintain a significant presence in Milwaukee as an “automation center of excellence” for the combined company. It also said it would expand its board from 10 to 13 directors, with three nominated from the current Rockwell board.
“We remain convinced there is compelling strategic, operational, and financial merit to bringing together our two companies,” Emerson Chief Executive David Farr, who has been at the company’s helm for 17 years, said in a statement.
St Louis, Missouri-based Emerson also estimated the total capitalised value of the deal synergies to be in excess of $6 billion and said it did not anticipate any material antitrust issues.
“Even after ‘capitalised’ synergies of $6 billion, the returns would be sub-par and exposed to the cyclical downside risk inherent to Rockwell’s end-markets,” Cowen and Company analysts covering Emerson wrote in a note.
Emerson’s strength is in process automation, helping power plants and factories in sectors such as mining and cement operate more efficiently.
Rockwell is a leader in so-called discrete automation, helping assemble component parts to manufacture items such as automobiles, household appliances and computer systems.
Rockwell caters to its discrete automation customers using a programmable logic controller platform it calls Logix. It has been seeking to expand this control platform to process automation and cater to so-called hybrid customers using a combination of process and discrete automation.
Emerson uses a distributed control system platform for its process and hybrid automation customers called DeltaV. Should it acquire Rockwell, it plans to offer its Logix platform to customers alongside DeltaV. — Reuters