Emerson Electric to Boost Takeover Offer for Rockwell Automation

By Dana Cimilluca Features Dow Jones Newswires

Emerson Electric Co. plans to boost its takeover offer for Rockwell Automation Inc., ratcheting up an effort to bring its reluctant rival to the negotiating table.

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Emerson is planning to send a letter as early as Thursday to Rockwell Chief Executive Blake Moret proposing a takeover at $225 a share, 60% in cash and 40% in stock for a total value of some $29 billion, according to people familiar with the matter.

It is St. Louis-based Emerson's third bid for Rockwell and compares with a $215-a-share offer put forward in October and one in August worth $200 a share. Both were equal parts cash and stock.

The earlier overtures were met with resistance from Rockwell, which has refused to engage in negotiations, according to people familiar with the matter. It is not clear what Rockwell's reaction to the latest expected proposal would be.

A Rockwell spokeswoman had no immediate comment.

When Emerson's effort to buy Rockwell became public late last month, Rockwell said in a statement that its board determined the proposals weren't in the best interest of the company or its investors. Mr. Moret added that the board and management "are committed to serving the best interests of the company and Rockwell Automation shareowners, and are confident in the company's strategic direction and our ability to continue delivering superior levels of growth and value creation."

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Emerson is hoping that the higher offer, with a greater proportion of cash, will be enough to convince Rockwell officials to sit down and talk -- either on their own or at the urging of the company's investors.

Rockwell is holding an investor meeting Thursday in Houston.

Emerson is pushing ahead with the bid because it believes that putting the companies together would create a new powerhouse in the production of machines and software used in manufacturing, a $200 billion global market. The combined company would have a market capitalization based on current values of more than $60 billion and approximately $23 billion in annual revenue, and potentially be in a position to better compete with European rivals like Siemens AG.

The companies have complementary product lines and geographies, and Emerson believes that combining them would accelerate their growth. Rockwell's strength is in so-called discrete products used in areas including auto assembly, packaging and printing, while Emerson excels in so-called process control for power plants, oil-and-gas facilities and the like.

Customers of Rockwell, Emerson and others in the industry are increasingly looking to simplify factory-control processes and for an integrated offering.

Automation systems broadly have been a sweet spot for industrial investment as customers look for more efficiency from existing plants and as manufacturing becomes ever-more automated and digital.

Emerson estimates more than $6 billion of synergies from the potential deal, which it reckons is worth an additional $10 a share to Rockwell shareholders, the people said. The deal would add to adjusted per-share earnings in the first year, by Emerson's calculations.

The expected offer is at a relatively rich multiple of 24 times past earnings before interest, taxes, depreciation and amortization, and represents a 30% premium to Rockwell's average share price in the 90 days leading up to when the pursuit became public Oct. 31.

The combined company would have an "automation center of excellence" in Milwaukee, where Rockwell is based. Emerson is also open to giving Rockwell officials important roles in the governance of a new entity, one of the people said.

--Andrew Tangel and Bob Tita contributed to this article.

Write to Dana Cimilluca at dana.cimilluca@wsj.com

(END) Dow Jones Newswires

November 16, 2017 06:48 ET (11:48 GMT)