Industrial consolidation: Emerson Electric tries to buy Rockwell Automation for $27 billion

Emerson Electric, a company with a market capitalisation of more than $40 billion, is trying to buy Rockwell Automation, which has a market cap of about $26 billion. 

Emerson has reportedly offered more than $27 billion for Rockwell, but has been rejected.

Not apparently because of the money, but because Rockwell is said to be “fiercely independent” by CNBC, which says the acquisition bid was met with a “terse rejection”. 

Emerson says the capitalised synergies between the companies would be worth $6 billion, which may or may not be an indication of how much higher it is willing to go.

But despite Emerson’s reportedly repeated offers of a takeover, Rockwell’s board has “unanimously rejected” what it calls “unsolicited proposals from Emerson”.

Blake Moret, president and chief executive officer, says: “The Rockwell Automation board of directors and management team 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.”

It’s difficult to say whether this is a negotiating tactic to try and raise the bid, but Emerson does seem keen on the acquisition.

Emerson has already made several big-money buys this year.

In April, Emerson completed the acquisition of Pentair’s valves and controls business for $3.15 billion.

Last month, Emerson agreed to pay $510 million to buy Paradigm, a developer of software solutions for the gas and oil industry.

In the same month, Emerson bought GeoFields, another software developer for the oil and gas industry, for an undisclosed sum.

Emerson’s interest in Rockwell apparently fits in with the Paradigm and GeoFields purchases because Rockwell has a strong offering in the industrial automation sector.

Of particular interest, perhaps, is Rockwell’s recent launch of its infrastructure-as-a-service offering.

IaaS is something more commonly found in the “tech” – as in computer tech – industry, with companies like IBM, Microsoft, HPE, Amazon Web Services, being the leading providers.

GE Digital recently decided it would not build additional data centres to host its Predix platform and instead use AWS servers. It also made a deal with Microsoft to use its Azure cloud.

Rockwell’s IaaS offering may have come at a time when more industrial companies have their own growing industrial internet platforms – competing with Predix – are faced with decisions like GE Digital.

Siemens has an IIoT platform like Predix which is called MindSphere, and ABB has its own, which it calls Ability. Honeywell, Bosch and many others have similar IIoT platforms, most of which are very new – about a year old.

Many of those companies may not want to develop their own data centre infrastructure and instead hire someone else’s, especially if the provider is a specialist industrial automation company like Rockwell.

ABB might be an exception here because it has a data centre automation portfolio, and has partnered with Ericsson on infrastructure projects.

But Rockwell seems to be positioning itself as a provider of data centre, or industrial cloud, services to try and provide a choice to industrial sector companies which might have previously only considered AWS and the other cloud providers – some industrial networking devices even come pre-loaded with AWS integration, such as the one launched by Moxa.

Also recently, Rockwell launched new industrial computers, and CEO Moret has often spoken about the power of the industrial internet of things.

At the Cisco IoT World Forum earlier this year, Moret said: “Manufacturers and industrial operators are discovering practical ways to apply IoT across their operations, and they’re deriving measurable business value as a result.

“Combining IoT technology and expertise in specific industrial applications enables better collaboration, faster problem-solving and increased productivity.”

Whether Rockwell is actually interested in joining Emerson or not is not absolutely clear, but Emerson has indicated that combining the two companies’ assets and resources would enable to further its ambition of becoming a leader in all areas of automation and provide stronger competition to industry giants such as General Electric, ABB and Siemens.

Emerson has confirmed that it made a “private offer” to Rockwell proposing a “combination of the two companies”.

It adds that the proposal was “rejected by Rockwell Automation and no discussions are currently ongoing between the two companies”.