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Rockwell Automation-PTC Alliance to Enhance IoT Platform

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In a bid to provide the most comprehensive and flexible Internet of Things (IoT) offerings in the industrial space, Rockwell Automation, Inc. (ROK - Free Report) has entered into a definitive agreement for a strategic partnership with PTC Inc. (PTC - Free Report) . Per the deal, Rockwell Automation will invest $1 billion in PTC as both companies will join forces to drive growth through digital technology.

Why PTC Is a Strategic Fit for Rockwell Automation

Based at Needham, MA, PTC is a leader in IoT applications and augmented reality (AR) domain. Its industrial innovation platform, and field-proven solutions and services help companies design, manufacture, operate, and service things for a smart, connected world. The company’s resources, technologies and industry expertise will complement Rockwell Automation’s vision and strategy.

Notably, Rockwell Automation remains focused to increase investments for expanding the value of The Connected Enterprise (CE) & Integration of software with other design tools & Scalable analytics. The industrial automation technology company selected PTC as the latter’s innovative solution will extend the value of CE and help strengthen customer relationships.

Consequently, both companies have decided to leverage their respective smart factory technologies by combining PTC’s ThingWorx IoT, Kepware industrial connectivity, and Vuforia AR platforms with Rockwell Automation’s FactoryTalk MES, FactoryTalk Analytics and Industrial Automation platforms. This partnership will also include joint sales and marketing initiatives around the world.

Terms of the Partnership

According to the deal, Rockwell Automation has agreed to buy 10.6-million newly-issued PTC shares at $94.50 a share, which is 8.6% above last Friday's closing price of $86.99. Rockwell Automation intends to fund the investment, which is subject to customary closing conditions and regulatory approvals, through a combination of cash on hand and commercial paper borrowings.

After the deal’s closure within 60 days, Rockwell Automation will hold an approximately 8.4% ownership interest in PTC. Further, Rockwell Automation’s chairman and CEO, Blake Moret, will join PTC’s board of directors with the closing of the equity transaction. Meanwhile, PTC intends to use the proceeds from the equity investment to repurchase stock to offset dilution.

Benefits of the Deal

The above-mentioned strategic alliance will provide the industrial automation industry an integrated suite of best-in-class technology. It will assist industrial customers to boost productivity, improve plant efficiency, reduced operational risk, and better system interoperability. Furthermore, the combination of IT (information technology) and OT (operations technology) is expected to accelerate growth for both companies.

CE Remains a Growth Driver

Rockwell Automation is actively engaged in the evaluation of inorganic opportunities to accelerate the CE strategy. Its operational execution is also enabling it to aggressively expand R&D funding for CE. Additionally, the company projects its information solutions and connected services revenues to advance $300 million in fiscal 2018, and grow at a double-digit rate in the near future.

Other Developments

Rockwell Automation, in another development, increased its share repurchase target for fiscal 2018 to $1.5 billion. This represents a $300-million increase to the previous plans to repurchase $1.2 billion in the fiscal. During the fiscal second quarter, the company repurchased 2.5-million shares for $465 million. The company also announced its senior leadership transitions to be effective from Jul 2, to boost business performance.

Share Price Performance

Rockwell Automation has outperformed its industry with respect to price performance in a year’s time. The stock has gained around 11%, while the industry has recorded growth of 7%, during the same time frame.



 

Zacks Rank & Other Stocks to Consider

Rockwell Automation currently carries a Zacks Rank #2 (Buy).

Both Axon Enterprise, Inc and Caterpillar Inc. (CAT - Free Report) belong to the same sector, flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Axon Enterprise has a long-term earnings growth rate of 25%. Its shares have appreciated a whopping 170%, over the past year. Caterpillar has a long-term earnings growth rate of 13.3%. The company’s shares have been up 47% in the past year.

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