Emerson Electric Co. may not be done trying to acquire Milwaukee-based Rockwell Automation, but Emerson chairman and chief executive officer David Farr said it is “a finite situation” and the company would be disciplined when it comes to price.
Rockwell announced last week it had rejected a $27 billion takeover bid from St. Louis-based Emerson that would have paid $215 per share in cash and stock. That offer, received by Rockwell on Oct. 10, followed a $200 per share offer from Emerson on Aug. 2.
The company issued a statement saying it had carefully considered the offers, but the board decided the acquisition would not be in “the best interest” of Rockwell or its shareholders.
“The industrial logic behind this combination is very clear in my mind and the board’s mind,” Farr said during Emerson’s earnings call. “The result would be a diversified company that’s well positioned to compete and thrive over the long term and create value for our customers, our employees, and our shareholders.”
Farr described the Oct. 10 offer as “a full and fair price” and repeatedly made the case that the two companies would be stronger together.
“Looking across our competitive set, no two companies have a more logical fit than Emerson and Rockwell or provide a clearer path to strengthen customer relationships and generate enhanced revenue and earnings growth for many years to come,” Farr said.
The heart of his argument was that Emerson would bring strength in process manufacturing automation while Rockwell would bring strength in discrete manufacturing automation. Building a stronger discrete automation business is part of Emerson’s strategic plan, particularly since it began going through a repositioning initiative in 2015.
“Rockwell’s management has for many years described to its shareholders the importance of process automation for future growth. Emerson has the scale and the best in class process automation Rockwell has been trying to build for many, many years,” Farr said.
He said the two companies are market leaders in the areas where they compete today and the combination would take advantage of the strengths of both companies.
“As our industry continues to consolidate to meet customer demand, we believe the opportunity to combine Emerson and Rockwell now is a timely, unique and attractive proposition for both sets of customers, shareholders, and employees,” Farr said. “We are hopeful Rockwell’s board and management team will engage with us for the benefit of all stakeholders.”
But he also added the offer wouldn’t be made indefinitely “without a clear signal that Rockwell and its shareholders are open to a mutually beneficial transaction.”
“I firmly believe this is the right thing to do for our customers, to keep them competitive, to allow them to produce more efficiently, especially with the newer technology and when they want to use less and less people out there,” Farr said.
If the deal does not come together, Farr said Emerson would be able to get to a similar point through smaller acquisitions, joint ventures and technology partnerships.
“While we will be disappointed if Rockwell lets this unique opportunity go unexplored, we will remain disciplined with respect to price and we have a very viable strategic plan in place,” he said.