Who will buy

By : Jim Pinto,
San Diego, CA.

First published in Industrial Controls Intelligence, July '99

Jack Grenard's rumor mill that stirred up so much interest on the Automation List has some truth to it. It's not about whether Allen-Bradley is being bought. A-B is the Rockwell flagship - without A-B Rockwell wouldn't be much. Rockwell itself is inevitably the acquisition candidate.


Rockwell got out of aerospace and fax/modem-chips and moved into industrial automation with the purchase of A-B (which up to that time was privately held). As it kept divesting unrelated businesses, Rockwell annual sales shrunk from about $ 13b (95) to $ 10.3b (96) to $ 7.8b(97) to $ 6.7b (98). Their fiscal year ends in September. First-half 99 sales were $ 3.2b, which shows no growth. Net income in '98 was a loss of ($427m) and first-half 99 profit was $257m, which is not too bad - it brought the stock price up. Market-cap at June 99 is about $ 11b, which represents a price/book ratio of 4.6 and price/sales of 1.6.

Not If, but When and Who

Given these numbers, it seems clear that it is NOT a matter of whether Rockwell will be acquired - but simply when, and by who. Of course, Allen-Bradley represents their crown-jewels.

Take a guess as to who will acquire Rockwell - to get A-B. You'd be limited to the very few who are large enough to afford it.

GE-Fanuc (joint venture of GE and Fanuc) needs such an acquisition - and that probably fuelled the rumor. Honeywell is too busy digesting its merger with Allied Signal. (Hey, I predicted almost 2 years ago that Honeywell would merge - though I wasn't sure with who). Emerson just bought Daniel (May 99), but still has an appetite for A-B; years ago, they lost the A-B bid to Rockwell simply on price and it might be worth it to them now. Siemens would like to gain the US market-share leadership that hasn't quite developed after their acquisition of the Texas Instruments PLC business - but they are probably not bold enough to acquire Rockwell to gain A-B. Schneider (Modicon, Square D, and a stable of French PLC manufacturers) has enough of its own troubles. ABB is probably too fresh from the acquisition of Elsag-Bailey (October 98). Yokogawa simply doesn't know how to make acquisitions within the Japanese culture. That leaves Invensys - formerly Siebe - (Foxboro, Wonderware, Eurotherm, APV) who might be a candidate; this is my own company affiliation, but I'm not involved - really.

But hey, who knows? There may be some enlightened Ted Turner or Warren Buffet out there who is lusting for leadership in industrial automation.....

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