Rockwell Automation Paves Way for $16 Billion Takeover
June 18, 2013
Bloomberg Reports Profits, Low Debt and Free Cash Flow Yield Are Making the Company an Acquisition Target of Large Corporations and Private Equity Firms
Industrial conglomerates such as Emerson, Honeywell and ABB are keeping their eyes peeled for industrial automation technology provider Rockwell Automation's next move toward signs that point to a takeover.
The $12 billion company is proving that demand for assembly-line components could pave the way for the second-largest U.S. industrial acquisition on record, according to Bloomberg. Bloomberg analysts predict Rockwell's net income and revenue will increase for the fourth straight year in fiscal 2013 to $753 million and $6.4 billion, making the company a recurring subject of takeover speculation.
Bloomberg data also shows that Rockwell's free cash flow topped 92% of manufacturing equipment providers, and along with low debt, could make it of interest to private equity firms such as Nomura Holdings.
ABB may look to acquire Rockwell as a way to expand its U.S. presence. Shareholder New Amsterdam Partners (NAP) says ABB could ask for a takeover price of about $115 a share.
"The highest value for Rockwell Automation shareholders will be realized by Rockwell Automation remaining an independent company and executing our growth and performance strategy," wrote John Bernaden, a spokesman for Rockwell, in an e-mail.
Rockwell's return on equity rate was 36% last quarter, compared with an average of 13% from other measurement instrument competitors. Michelle Clayman, chief investment officer for NAP, says the combination of a high rate of return and Rockwell's growth prospects could be attractive to buyers. Since at least 2008, Rockwell has also been viewed as a potential acquisition target for strategic buyers because of declining stock prices.
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