Analyst Speculation on GE Interest in Rockwell Automation Fires Up Rumor Mill

Dec. 18, 2009
General Electric’s recent moves to divest itself of divisions and product lines such as NBC Universal and its security systems business have inspired analysts who track the company to do some holiday shopping on GE’s behalf

General Electric’s recent moves to divest itself of divisions and product lines such as NBC Universal and its security systems business have inspired analysts who track the company to do some holiday shopping on GE’s behalf. One analyst in a recent letter to investors had a provocative idea for what Plainville, Conn.-based GE could do with the proceeds of the transactions, and stirred up quite a bit of speculation in the process.

JP Morgan analyst Steve Tusa said industrial automation giant Rockwell Automation, Milwaukee, would be a fine addition to GE’s industrial operations. GE announced in August that it and Japan-based manufacturer Fanuc would dissolve GE Fanuc, their 14-year joint venture in factory automation.

Investors took the suggestion seriously, pushing Rockwell’s stock up to a 52-week high after financial news organizations reported on Tusa’s letter.

Paul Glader with the Wall Street Journal said in a post on the newspaper’s Deal Journal blog that GE executives have hinted at their interest in the past. “In the past year, GE executives have mentioned Rockwell as a company they would like to own,” Glader wrote. “The case grows stronger as GE chief executive Jeff Immelt has spoken more and more emphatically about GE focusing on growing manufacturing and industrial businesses instead of financial businesses.”

The value of Rockwell is clear, given its enviable position in the automation market and the depth of the distributor relationships it has built over the years, but whether those advantages could be sustained under different ownership is an open question.

Both Rockwell and GE have declined to comment publicly on the matter. A Rockwell spokesperson was widely quoted saying Rockwell can give shareholders the best value as an independent company.