Rockwell Announces Intention to Buy Reliance To Build Automated Business
Oct. 21, 1994
SEAL BEACH, Calif. (AP) _ Rockwell International Corp. is trying to bust up the marriage of industrial equipment makers Reliance Electric and General Signal Corp.
Rockwell, a major aerospace company and maker of the space shuttle, said Thursday it has offered to buy Cleveland-based Reliance for $1.5 billion in cash. That beats the $1.4 billion stock-swap offer General Signal made for Reliance on Aug. 30.
''I think they have an excellent opportunity to wind up winning this,'' said Wolfgang Demisch, an aerospace analyst and managing director of BT Securities in New York. He said Rockwell has a record of being quite forceful in its takeover attempts.
Rockwell's offer is priced at $30 per share, a 22 percent premium over Wednesday's closing price for Reliance of $24.50 and 50 percent above its price of $19.87 1/2 on Aug. 29, the day before the deal with General Signal was announced. General Signal's offer is valued at about $27.53.
The Rockwell bid was sent in a letter from Donald R. Beall, its chairman and chief executive officer, to H. Virgil Sherrill, Reliance's board chairman, and John C. Morley, the company's president and chief executive officer.
Beall wrote the General Signal-Reliance deal left Rockwell executives ''surprised and disappointed.''
''After an intensive strategic review ... we have concluded that the strategic and financial advantages of combining our two companies are too compelling to ignore,'' Beall wrote.
''Accordingly, I am writing to inform you of our intention to acquire Reliance Electric.''
Beall said the merger would well-position Rockwell to create smarter products in the industrial automation business.
The task would be accomplished by combining Reliance's operations with Rockwell's Allen-Bradley, which Rockwell acquired in 1985. Since then, Allen- Bradley has more than doubled its sales, and expects to report sales of more than $2.1 billion for fiscal 1994, Rockwell reported.
The combined automation enterprise would generate annual sales of about $3.5 billion, Beall estimated in his letter.
Allen-Bradley has strengths in control logic, man-machine interfaces and sensors. Reliance Electric has complementary strengths in motors and drives.
Beall said if Reliance accepts the Rockwell offer Reliance's major operations in telecommunications will be sold because they don't fit into Rockwell's strategic plans. The statement did not elaborate.
Stamford, Conn.-based General Signal said Thursday its original offer stands. ''We feel we have made a very fair offer for Reliance Electric. We think it's a deal that works well for the shareholders,'' said Nino Fernandez, vice president for investor relations.
He said the company has not spoken to Reliance since the Rockwell offer was made. Steve Van Oss, a Reliance spokesman, said board members discussed the offer this morning and adopted a wait-and-see posture. ''It came as a complete surprise to the company,'' he said.
Van Oss said Reliance is moving forward with its General Signal merger, though he added the company is unsure what effect Rockwell's bid will have.
Reliance announced its third-quarter earnings this morning, saying profits more than doubled to $21 million, or 41 cents per share. Sales grew 12 percent to $449 million, the company said.
Reliance shares jumped $5.12 1/2 to close at $29.62 1/2 on the New York Stock Exchange. Rockwell was down 37 1/2 cents to $36, while General Signal gained $1.25 to $35.37 1/2 .