Emerson Ups Offer for Chloride Group, Wins Bidding War for Expansion in UPS Market

July 9, 2010
In a move that will consolidate two major players in the market for uninterruptible power supplies (UPS) and related systems

In a move that will consolidate two major players in the market for uninterruptible power supplies (UPS) and related systems, the boards of directors of Emerson Electric Co., Pittsburgh, and Chloride Group PLC, London, announced that the Chloride board “unanimously intends to recommend acceptance of Emerson’s cash offer” for all shares of Chloride. Emerson made the offer on June 28 in the final move of a billion-dollar bidding war against Swiss technology giant ABB Ltd. for the U.K.-based manufacturer of UPS products and systems.

Emerson’s cash offer of 375 pence per share, made through its subsidiary Rutherfurd Acquisitions Limited, comes to approximately $1.49 billion, a substantial premium over ABB’s final offer of $1.25 billion. Emerson’s original offer in late April was rejected by Chloride’s board as significantly undervaluing the company and launched a bidding war that boosted the final deal by almost 38 percent over Emerson’s initial offer.

The fit of Chloride Group’s UPS operations with one of Emerson’s core businesses appears to have made it worth the premium price, according to Emerson.

“The merits of the deal for both companies are compelling,” said David Farr, chairman, CEO and president of Emerson, in a release. “The UPS market has become a place where specialist industry knowledge, geographic access and global scale are more important than ever before. The geographic reach and offerings of Emerson and Chloride are highly complementary and highlight the strategic importance of the transaction. In addition, the combination with Chloride is expected to deliver significant annual cost savings of at least £33 million through purchasing and manufacturing efficiencies, staff and facility reductions, and the elimination of other business cost structure duplications including overhead reductions.”

It’s likely we’ll be hearing ABB’s name again in the acquisition game. The company has a multi-billion-dollar warchest of cash and spent a billion of it in May to buy Ventyx, an Atlanta-based software provider specializing in systems to manage energy networks.

“While we still see considerable value in the combination of ABB and Chloride and have a high regard for the Chloride management team, we must take a disciplined approach when assessing potential acquisitions,” said Joe Hogan, ABB’s CEO.

Tim Cobbold, chief executive of Chloride, further pointed out the prospects of an Emerson-Chloride combination in the world UPS market. “Chloride and Emerson will represent a powerful combination in the global secure power market,” Cobbold said. “The geographic reach of the two companies are complementary and Emerson intends that Chloride serves as its new European Network Power Systems headquarters. We have a strong and experienced management team who will work closely with Emerson to fully realize the potential of the combined business.”