Emerson Increases Offer for Rockwell to $29 Billion -- 2nd Update

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 and forge a new giant in industrial automation.

Emerson sent a letter 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. Emerson disclosed the letter Thursday morning, confirming an earlier Wall Street Journal report.

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 valued at $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.

In a statement following the new bid, Rockwell said its board will "carefully review Emerson's proposal to determine the course of action that it believes is in the best interest of the company" and its shareholders.

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."

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 evermore automated and digital.

Emerson estimates more than $6 billion of capitalized synergies from the potential deal, which it reckons is worth an additional $10 a share to Rockwell shareholders, according to the letter. 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 21 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 also indicated it is open to giving Rockwell officials important roles in the governance of a new entity.

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

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

Corrections & Amplifications

This item was corrected at 11:49 a.m. ET to show that Emerson Electric's latest offer to buy Rockwell Automation represents a multiple of 21 times past earnings before interest, taxes, depreciation and amortization, not 24 times.

Emerson Electric's latest offer to buy Rockwell Automation represents a multiple of 21 times past earnings before interest, taxes, depreciation and amortization. "Emerson Electric to Boost Takeover Offer for Rockwell Automation," at 6:48 a.m. ET and an update at 9:29 a.m. ET incorrectly said the multiple is 24 times. (Nov. 16, 2017)

Emerson Electric Co. boosted its takeover offer for Rockwell Automation Inc., ratcheting up an effort to bring its reluctant rival to the negotiating table and forge a new giant in industrial automation.

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 valued at $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.

Rockwell is holding an investor meeting Thursday in Houston.

Longbow Research analyst Chris Dankert said Rockwell executives are likely to face questions over whether the company is better suited to boost revenue and its stock price as an independent company.

"The battle for Rockwell's soul comes down to ... Can go they grow faster or achieve a higher multiple without Emerson?" Mr. Dankert said.

Emerson is pushing ahead with the bid because it believes that putting the companies together would create a new powerhouse in the production of equipment and software used to control automated manufacturing processes, 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.

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 evermore automated and digital.

The offer is at a relatively rich multiple of 21 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.

At Great Lakes Brewing Co., Rockwell hardware and software have helped employees in Cleveland focus on developing new types of beer, said John Blystone, electrical and controls supervisor for the brewer. "If you have them regulating temperatures in the tank farm 365 days a year, you're probably not going to have that person dreaming up the next, greatest IPA," Mr. Blystone said.

At iBio CDMO LLC, a Texas-based maker of vaccines and antibodies used to treat chronic diseases and cancer, Rockwell devices and software have helped reduce production costs and the amount of wasted batches. "We can make more products and make them more accurately," said Barry Holtz, the company's president.

Emerson and Rockwell's systems are increasingly used by the same customers. Combining the companies and integrating their product lines would appeal to customers looking to simplify factory control processes and eliminate the need for custom-built system interfaces, said Sandy Vasser, a retired electrical engineer for Exxon Mobil Corp. who has worked with both companies' automation systems.

"Both companies have similar challenges, but coming from different directions," Mr. Vasser said. "Emerson has been trying to scale down to smaller control systems. Rockwell started from small controls and they've been completing for larger plant systems."

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

(END) Dow Jones Newswires

November 16, 2017 12:05 ET (17:05 GMT)