Blog Exposure – Rockwell Automation’s Board Rejects Third Revised Unsolicited Proposal from Emerson Electric

Stock Monitor: Emerson Electric Post
Earnings Reporting

LONDON, UK / ACCESSWIRE / November 27, 2017 / Active-Investors issued a free report on Rockwell
Automation, Inc. (NYSE: ROK) (“Rockwell”), which is readily accessible upon registration
at www.active-investors.com/registration-sg/?symbol=ROK as the Company’s latest news hit the wire. On November
22, 2017, the Company announced
that its Board of Directors has rejected the November 16, 2017, revised
unsolicited proposal to acquire the Company by Emerson Electric Co. (NYSE: EMR)
(“Emerson”). Rockwell has said that it had
rejected Emerson’s third revised proposal at it undervalues the Company and its
growth prospects. Sign up now for
our free research reports at: www.active-investors.com/registration-sg.

Active-Investors.com is focused on giving you timely
information and the inside line on companies that matter to you. This morning, Rockwell
Automation most recent news is on our radar and
we have decided to include it on our blog post. Today’s free coverage on ROK
and EMR are available at:

www.active-investors.com/registration-sg/?symbol=ROK

www.active-investors.com/registration-sg/?symbol=EMR

Unsolicited
Proposals for Acquisition from Emerson

Milwaukee, Wisconsin
based Rockwell is one of the world’s largest industrial automation and
information company, while St. Louis, Missouri based Emerson is a diversified
global manufacturing and technology company with two main business verticals:
Automation Solutions and Commercial & Residential Solutions.

Emerson had first made
an unsolicited offer to acquire Rockwell in August 2017, which was promptly
rejected by Rockwell. Emerson’s August 2017 proposal had offered $200 for each
Rockwell’s share in a cash plus stock deal. This was followed by a second
revised and unsolicited proposal from Emerson on October 10, 2017, where it
offered to pay $215 for each Rockwell’s shares of which $107.50 would be in
cash plus 225 million of Emerson’s shares valued at $107.50 per share.

The most recent and
third unsolicited proposal from Emerson was received by Rockwell on November
16, 2017 which offers $225 for each of Rockwell’s share, of which 60% in cash
and 40% in stock. This translates to $135 per share in cash and $90 per share
in Emerson’s shares valuing Rockwell at approximately $29 billion.

Emerson believes that
the Emerson-Rockwell merger would lead to the formation of a world leader in
the $200 billion global automation market. The merger would bring the expertise
and capabilities of both companies on one platform and offer an unmatched technology
portfolio to its global customers. It also believes that the merger would
create great value for Rockwell’s shareholders.

Additionally, the
combined Company would have approximately $23 billion in annual revenue and an
accelerated top-line and bottom-line growth based on increased investments in
software and technology. The combined Company is expected to be accretive to
adjusted EPS and free cash flow within one year of closing the transaction. The
merger would result in synergies and enhanced operating efficiencies which
would in turn result in operating margin of approximately 20% as well as
double-digit EPS growth. The combined Company is expected to generate free cash
flow of more than $3 billion within one year of closing of the transaction. This
would allow the combined Company to pay off its debts and create value for its
shareholders via dividends and share buybacks.

Rockwell’s
response to Emerson’s third unsolicited proposal

Rockwell’s Board has
reviewed Emerson’s revised unsolicited proposal received on November 16, 2017.
The Board has decided to reject the proposal after consulting its financial and
legal advisors. According to Rockwell’s Board, the revised proposal is “not in the best interests of Rockwell
Automation and its shareowners”. The Board feels that the revised
proposal undervalues the Company and its future prospects and therefore is a
significant long-term risk for its shareholders. The proposed Rockwell-Emerson
deal would not be able to successfully grow in the evolving market. The Board
is confident that its current business strategy would be more beneficial to its
shareholders and create greater long-term value as compared to the proposed
Rockwell-Emerson deal.

Commenting on the
Company’s stand Blake D. Moret, President and CEO of Rockwell, said:

“Bigger is not always better for driving growth and value
creation. While Emerson may see this proposed acquisition as necessary to
enhance its growth and earnings potential and expand its capabilities in the
industrial automation and information market, Rockwell does not. We have the
talent, the technology, the culture, and the resources necessary to continue
raising the bar, exceeding our customers’ expectations and creating superior
value for Rockwell Automation shareowners.”

Rockwell’s
reasons for rejecting Emerson’s third offer

According to Rockwell,
Emerson’s November 16 proposal is valued at only $218.48 per Rockwell share and
not $225 per share. This is because Emerson’s offer of $135 per share in cash
and of $90 per share in stock based on Emerson’s 30-Day VWAP of $64.55 as of
October 30, 2017. However, the value reduces on November 17, 2017, as it is
$83.48 per share based on Emerson’s closing price of $59.85.

Rockwell also refutes
Emerson’s argument that the Company would have a better growth prospect as a
merged entity compared to growth on a standalone basis. Rockwell’s business
strategy has resulted in over 6% organic sales growth and 14% adjusted earnings
per share growth in fiscal year 2017. The Company’s average ROIC (return on
invested capital) over the last ten years is nearly 30%.

Rockwell fears that the
merger would be detrimental to its growth as currently it offers its industrial
automation and information solutions across all industries, including process,
hybrid, and discrete applications, on a single platform and in one software
environment. However, the combined Company would have different technology
platforms and market access models which would lead to channel and partner
conflicts and hence result in damaging the Company’s unique distribution model.

Rockwell does not agree
with Emerson on the deal’s value proposition for its shareholders. The Company
referred to the analysis done by Moody’s Investors Service on the proposed
merger between the two companies. According to Moody’s report the proposed
transaction would lead to the combined Company having a debt of nearly $25
billion which is nearly five times the pro-forma ratio of debt to earnings
before interest, tax, depreciation, and amortization (EBITDA). The combined
Company would have great difficulty in maintaining return to shareholders via
dividends and share buybacks without compromising on capital investments.

Rockwell also feels that
the synergies portrayed from the merger of the two companies is exaggerated,
and to achieve the said cost synergies, Emerson would have to cut costs across
functions. This would result in major job cuts across the Company, which
Rockwell does not support.

Rockwell has indicated
that the offer which includes Emerson’s stock is a financial risk for is
shareholders. Rockwell has shown that Emerson’s shares have consistently
underperformed the S&P 500 index in the last ten years and lags behind when
compared to Rockwell’s stock performance in the same period. Another indication
that the Emerson’s offer is not attractive is the stock’s market prices which
have fallen nearly 10% in the three-week’s time since Emerson made the revised
offer. Rockwell has questioned Emerson’s ability to manage the combined company
given its M&A history. Rockwell cited the example of Chloride PLC which
Emerson acquired in 2010 and later had sold off at great loss.

Stock Performance Snapshot

November
24, 2017 – At Friday’s closing bell, Rockwell Automation’s
stock slightly rose 0.24%, ending the trading session at $191.48.

Volume traded for the
day: 280.01 thousand shares.

Stock performance in the
last month – up 2.36%; previous three-month period – up 19.97%; past twelve-month
period – up 45.21%; and year-to-date – up 42.47%

After last Friday’s
close, Rockwell Automation’s market cap was at $24.55 billion.

Price to Earnings (P/E)
ratio was at 30.10.

The stock has a dividend
yield of 1.59%.

The stock is part of the Industrial
Goods sector, categorized under the Diversified Machinery industry. This sector
was up 0.1% at the end of the session.

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