Rockwell Spurns Emerson Again

Rockwell Automation’s board of directors again declined Emerson Electric’s proposal to acquire the Milwaukee-based industrial automation specialist. Emerson’s latest offer, its third since early October, valued the deal at $29 billion in cash and Emerson stock.

In a release issued this morning, Rockwell included a letter from President and CEO Blake Moret to Emerson Chairman and CEO David Farr that spells out in some compelling detail the Rockwell board’s reasoning for declining the offer. The letter is worth reading in full for a sense of how Rockwell views its market strategy and its appraisal of the drawbacks of becoming part of a conglomerate.

In the letter, Moret said the offer undervalues Rockwell and its prospects for future growth, presents a long-term risk for Rockwell shareholders and would create a business that would not be well positioned to compete in the rapidly changing industrial automation market. Moret also pointed to the leverage Emerson would need to complete the acquisition as a hindrance to investments needed to drive growth and made some pointed observations about Emerson’s pursuit of Chloride plc in 2010.

“Your proposed combination would dampen, not enhance, the ability to grow in the evolving industrial automation and information market,” Moret wrote to Farr. “Unlike Emerson, Rockwell Automation is singularly focused on making investments in one platform to deliver value to customers. Rockwell Automation provides solutions across all industries, including process, hybrid, and discrete applications, on a single platform and in one software environment. This approach enables the simplification our customers tell us they need.”

Among the advantages Rockwell has built and stands to lose in a combination with Emerson, Moret pointed to the strength of its distribution channel. “The proposed company would also have fundamental channel and partner conflicts, resulting in damage to Rockwell Automation’s unique limited distribution model. In short, given different technology platforms and market access models, a combination would destroy value for shareowners and customers rather than create it,” Moret said.

The overall tone of the Moret’s letter sounds like a much more emphatic “no” and seems intended to dissuade Farr from making another unsolicited bid for Rockwell. We’ll see in time whether Farr takes it that way.