Rockwell Automation chief executive officer Blake Moret would potentially be turning down millions of dollars for himself if his company rejects the latest takeover bid from St. Louis-based Emerson Electric Co.
Emerson increased its bid to $225 per share on Thursday. The company’s third offer was worth $29 billion after two earlier offers of $215 and $200 per share were rejected by the Rockwell board.
Moret, who is also set to become chairman of the Milwaukee-based company next year, would have received $8.8 million as a change of control payment for an acquisition taking place Sept. 30, 2016, according to the company’s securities filing. That figure could push even higher when Rockwell files its 2017 proxy next month as Moret has now spent more time as CEO. Former longtime chairman and CEO Keith Nosbusch, for example, had an agreement that would have paid him $16.3 million in 2016.
To receive the payment, Moret would have to leave the company or be terminated within two years of an acquisition. The change of control agreement is intended to encourage executives to negotiate a good outcome for company shareholders without risking their own financial situation. Moret’s total compensation was almost $3.9 million in 2016.
“We do not believe these agreements encourage our executives to favor or oppose a change of control,” the Rockwell securities filing says. “We believe these agreements strike a balance that the amounts are neither so low to cause an executive to oppose a change of control nor so high as to cause an executive to favor a change of control.”
Beyond potential payments for Moret and other executives, the proposed deal has other implications for Milwaukee. The city would lose a headquarters, although Emerson says it would create an automation center of excellence in the city.
Emerson also says it could realize $6 billion in synergies, including about $4 billion from cost savings from corporate costs, selling, general and administrative efficiency and manufacturing cost optimization. Rockwell also has a 240,000-square-foot operation in Mequon along with operations in Ladysmith and Richland Center.
During Rockwell’s annual investor presentation, Moret reiterated the company’s statement that the board would consider the offer and “respond in due course.” He said the company would not be commenting further because the proposal had just been received.
Moret had indicated during Rockwell’s fourth quarter earnings call last week that the company believed in its own strategic plans and would remain focused on those. The investor presentation Thursday struck a similar tone without much, if any, direct mention of Emerson.
The strategy focuses on bringing what Rockwell calls “the connected enterprise” to life. It draws on automation, data and analytics from individual machines, systems, factories and entire companies in an effort to be more productive.
“We can unlock industrial growth in the automation space by reducing the complexity and the risk,” Moret said.
Rockwell’s pitch is that it has a single software platform that can work with customers across different applications from discrete manufacturers in the auto industry to batch and hybrid companies in consumer and life science industries to continuous process applications in oil and gas.
“Not many, if anyone, can show this breadth,” Moret said. “We believe that there is nobody better positioned in this market to succeed, there is so much room to run.”
Moret said not all customers are at the same point in their shift toward the “connected enterprise” and it is important for Rockwell to start by understanding a customer’s problems and the opportunity for productivity improvements.
“We’re not offering technology in search of a problem,” he said.
The company currently has four or five dozen connected enterprise pilot projects with customers currently. Those efforts are intended to demonstrate some initial success before pushing the projects into the customer’s entire company. Moret said some of the projects are delivering revenue value now, but generating substantial gains will require building on successful outcomes.
“The slope of that curve is going to depend a lot on us,” he said.
Rockwell’s plan also calls for the company to generate about 1 percent of growth each year through acquisitions. Those deals are intended to help the company add technology, domain expertise and expand market access.
“We’re not making acquisitions just to bulk up,” Moret said. “What we’re looking at is to provide the best possible offering.”
Emerson’s pitch to Rockwell has been that combining the two companies would be a good strategic fit, with Rockwell bringing strength in discrete applications and Emerson contributing continuous process strength.
The St. Louis company included a chart in its presentation on the rationale for the deal with cells highlighting specific technologies where each company has strength or no offerings.
During his presentation, Moret said Rockwell’s acquisition strategy is about “what can catalyze the connected enterprise strategy.”
“It’s not to fill out all the cells in somebody’s spreadsheet,” Moret said without directly mentioning Emerson.