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EMERSON ELECTRIC (EMR)
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Emerson Electric : Equipment Maker Rejects New Offer From Emerson -- WSJ

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11/01/2017 | 07:48am CEST

Rockwell rejects Emerson's latest offer of $215 a share; 'We really don' t need them'

By Andrew Tangel, Dana Cimilluca and Bob Tita 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 1, 2017).

Rockwell Automation Inc. has rejected a takeover bid by Emerson Electric Co. worth roughly $27.5 billion, spurning a deal that would have combined two big U.S. makers of machines and software used in manufacturing.

The latest half-cash, half-stock bid by Emerson, a St. Louis-based industrial conglomerate, came in early October and was valued at $215 a share, according to Rockwell. The Milwaukee-based maker of industrial equipment said it also rejected an earlier Emerson bid in August valued at $200 a share.

Rockwell Chief Executive Blake Moret said in a statement the company's board and management are committed to serving the best interests of the company and shareholders and were "confident in the company's strategic direction and our ability to continue delivering superior levels of growth and value creation."

An Emerson spokesman on Tuesday confirmed the company's attempt to acquire Rockwell but declined to comment further.

Rockwell shares surged on news of Emerson's bids, which had been earlier reported by CNBC. Rockwell shares were up more than 8% to $202.71 in midday trading Tuesday. Emerson's stock was down 2.6%, suggesting its shareholders are less enthusiastic about a potential deal.

It wasn't immediately clear what might be Emerson's next step. Now that the bids have become public, Rockwell may feel shareholder pressure to engage in negotiations about a potential combination.

Rockwell was skeptical of the large amount of Emerson's stock, according to people familiar with the matter. It also has concerns about Emerson's management and its record with mergers and acquisitions, the people said.

One of these people described Rockwell's view of Emerson's bid as: "They need us. We really don't really need them."

Emerson estimates $6 billion of synergies from the potential deal, another person familiar with the matter said.

Should Emerson eventually succeed in its attempt to take over Rockwell, which is far from guaranteed, the combined company would have a "center of excellence" in Milwaukee and include Rockwell's name, this person added.

Both companies specialize in making products used in the manufacturing process, but with specialties in different sectors.

Emerson's automation business is largely focused on chemicals, cement, oil and natural-gas installations and other materials produced in outdoor facilities. Its business portfolio also includes hardware such as industrial valves and kitchen garbage disposals.

Rockwell has generally focused on developing equipment and software used to make products such as cars, electronics and food. Rockwell has increasingly been focused on what it calls the "connected enterprise," using software to link manufacturing to data across a company's operations.

"It's a different expertise," said Longbow Research analyst Chris Dankert. "This would give Emerson a much broader portfolio."

William Blair analyst Nicholas Heymann said the acquisition attempt highlights how Rockwell's software and data-analytics focus are becoming increasingly valuable "as manufacturing shifts from electromechanical to digital."

Rumors of Emerson's interest in Rockwell have circulated on Wall Street for several years. While analysts have viewed Rockwell as a solid fit with Emerson's industrial control line, Rockwell executives have shown little interest in selling.

Emerson, which supplied factory automation gear in some of the same markets as Rockwell, has been revamping its business portfolio in recent years. The company sold units that accounted for several billion dollars a year in sales to eliminate slower-growing or lower-margin businesses. Emerson sold its struggling network power business, which provided backup power equipment to server centers, to Platinum Equity for about $4 billion. It sold its motors and power-generation unit to Japan's Nidec for $1.2 billion.

Emerson CEO David Farr has pledged to replace the lost revenue with acquisitions. The company earlier this year completed the purchase of Pentair PLC's industrial valves-and-controls business for $3.15 billion.

Write to Andrew Tangel at Andrew.Tangel@wsj.com, Dana Cimilluca at dana.cimilluca@wsj.com and Bob Tita at robert.tita@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
EMERSON ELECTRIC 0.04% 72.39 Delayed Quote.2.48%
ROCKWELL AUTOMATION -1.35% 163.77 Delayed Quote.-12.00%
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Financials ($)
Sales 2018 17 390 M
EBIT 2018 2 955 M
Net income 2018 2 143 M
Debt 2018 3 317 M
Yield 2018 2,68%
P/E ratio 2018 21,62
P/E ratio 2019 19,58
EV / Sales 2018 2,81x
EV / Sales 2019 2,53x
Capitalization 45 526 M
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Mean consensus OUTPERFORM
Number of Analysts 22
Average target price 78,4 $
Spread / Average Target 8,2%
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Managers
NameTitle
David N. Farr Chairman & Chief Executive Officer
Michael H. Train President
Steven J. Pelch Chief Operating Officer & Executive Vice President
Frank J. Dellaquila Chief Financial Officer & Senior Executive VP
Jake Fritz Chief Information Officer & Vice President
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