Rockwell Automation Inc., Milwaukee, plans to sell the majority of its power systems segment, including its Reliance Electric motors and motor repair services, to boost shareholder value.
The company also plans to sell its Dodge mechanical motors businesses. Both businesses are headquartered in Greenville, S.C., and both businesses contribute substantially all of the revenue generated by Power Systems, the company said. Rockwell said the businesses are expected to generate $1 billion in revenue with segment operating margins of 15 percent in fiscal 2006.
The company will keep the Reliance Electric and Reliance-branded variable-speed drives and related parts and services, it said.
Rockwell Automation bought Reliance for $1.6 billion in cash after a bidding war with General Signal Corp., Stamford, Conn., in late 1994.
Reliance is a significant part of Rockwell Automation, said one Rockwell Automation distributor who asked not to be identified. He said Rockwell Automation and Reliance primarily went to market through separate sales forces, and that while some Rockwell Automation distributors carried Reliance products, the company did much of its business selling through motor distributors and motor repair shops.
“An interesting thing that was happening was some of the Reliance products, specifically the variable-speed drives, were sort of migrating to a Rockwell product,” he said. “So we were seeing competition from the Reliance channel against our traditional Rockwell products. We’re hopeful that that will change in that Rockwell is going to retain variable-speed drive products and expertise, and we won’t have to compete with the Reliance channel in that overlap gray area,” he said.
The power systems segment has contributed substantially to Rockwell’s growth and success, said Rockwell Automation’s chairman and CEO Keith Nosbusch. He said the companies for sale are both strong and poised for growth. “We believe they will benefit from ownership dedicated to investing and globalizing to sustain their growth as the premier providers of power transmission and conversion solutions,” he said.
The sale is expected to be concluded by the end of the year. Rockwell employs about 21,000 people and does business in 80 countries.