Rockwell Automation is planning to sell almost all of its Dodge mechanical power transmission and Reliance Electric motors businesses, to focus on its factory automation activities. The sale, which is expected to be completed by the end of this year, could raise an estimated $1.5-2bn.
The activities being sold represent about 95% of Rockwell`s Power Systems division and almost a fifth of Rockwell`s total revenues. They are expected to generate sales of around $1bn and operating margins of about 15% this year. The businesses, based on South Carolina, employ around 4,600 people, out of a total Rockwell workforce of aome 21,000.
"Power Systems is a great business," says Rockwell chief executive, Keith Nosbusch. "In their areas of strength, the Dodge and Reliance Electric businesses are unbeatable. We believe they will benefit from ownership dedicated to investing and globalising to sustain their growth as the premier providers of power transmission and conversion solutions".
The activities being sold include Dodge`s bearings, gears, couplings, clutches, brakes, pulleys and belt drive operations, and Reliance`s AC and DC motors, and motor repairs, operations. Rockwell is keeping Reliance`s variable speed drives business, most of whose products are designed by its controls division.
"We are not selling Power Systems out of financial need," says James Gelly, Rockwell`s chief financial officer. "We are separating these two parts of Rockwell because each deserves capital investment to fuel aggressive global growth strategies. We believe that this is the right thing to do for both Power and Control Systems."
Gelly adds that the businesses being sold have delivered double-digit organic revenue growth over the past couple of years.
The disposal is expected be in the form of cash sale with the proceeds going towards dividends or a share buybacks. They "will not burn a hole in our pockets," Gelly declares.
He says that investors are currently showing a strong interest in the industrial sector, pointing to the recent $1.8bn purchase of Rexnord by a venture capital company. Although Rexnord is "a reasonable proxy" to the operations being sold,Gelly adds, it is "not as good a business".
Rockwell International acquired Reliance Electric for $1.6bn in December 1994. Reliance had earlier bought Dodge in 1967.