Rockwell rejects Emerson bid
Automation equipment maker argues takeover offer of $215 per share undervalues it
Automation equipment maker Rockwell Automation said on Tuesday it had rejected an unsolicited acquisition bid from bigger rival Emerson Electric Co for more than $27 billion (Dh99.1 billion), arguing that the offer undervalued the company.
The snubbed bid illustrates how Emerson CEO David Farr, who has been at the helm for 17 years and had previously indicated he would consider only small, bolt-on acquisitions, is now seeking a transformational deal to diversify Emerson’s businesses and reduce their exposure to volatile energy prices.
Emerson’s strength is in process automation, helping power plants and factories in sectors such as mining and cement operate more efficiently. Rockwell, on the other hand, is a leader in so-called discrete automation, helping assemble component parts to manufacture items such as automobiles, household appliances and computer systems.
Rockwell said it had rejected a $215 per share bid from Emerson, split in half in its consideration between cash and Emerson shares. Rockwell shares gained 7.4 per cent to close at $200.82 on Tuesday. They are up 46 per cent year-to-date, versus a 16 per cent rise in Emerson shares.
The rejection followed a previous Emerson offer in August that valued Rockwell at $200 per share, also split in cash and stock, Rockwell said.
Emerson confirmed the takeover approach, but said that no talks were currently taking place between the two companies and that it would remain a disciplined buyer. It would not comment on whether it planned a new offer for Rockwell.
Emerson shares ended trading down 4.3 per cent at $64.46, giving it a market capitalisation of $41 billion. Analysts said the company faced an uphill battle to clinch a deal with Rockwell.
“Rockwell probably does not need Emerson at all. We also agree that Rockwell has done a fantastic job on its own and see strong growth and high returns ahead. This does not mean a deal will not happen, but it feels like a long shot for Emerson,” Vertical Research Partners analyst Jeff Sprague wrote in a research note.