To rewind, back on August 2, EMR sent an unsolicited proposal to ROK to acquire the company for $200/share, with approximately half of the consideration in cash and half in EMR common stock. This wasn't made public, however, until October 31 when ROK announced that it received this offer, and, that EMR sent another revised offer -- consisting of $107.50/share in cash and 225 million shares of EMR stock -- on October 10. This news popped shares of ROK higher by as much as 13% that day.
But, the stock began to lose steam throughout the session as investors digested ROK's statement regarding the acquisition proposal. Namely, that the Board of Directors are "confident in the company's strategic direction and its ability to continue delivering superior levels of growth and value creation." This offered a strong hint that the company wasn't too interested in executing a substantial merger. Or, at least that any offer would have to be incredibly enticing for it to consider.
That message was hammered home on November 8 when ROK issued its Q4 results, which were mixed as it missed on earnings ($1.69 vs. $1.72 consensus) with revenue inline at $1.67 billion. During its conference call, management reiterated that it reviewed and evaluated the EMR offer and that the Board unanimously determined that the proposals were not in its best interests. This comment, along with its mixed quarterly results, sent shares lower by about 3.5% that day.
Nevertheless, EMR forged ahead with its acquisition desires and bumped its offer higher on November 16. Specifically, it lifted the offer to $225/share in cash and stock for a total of $29 billion. In a press release, EMR said that it believes a combined ROK/EMR would create a leader in the $200 billion global automation market, and that the combined company would offer unmatched capabilities that integrates all aspects of the automation system.
This time, ROK didn't reject the offer out of hand. On November, ROK had an investor day in which it said it was still in the process of evaluating the offer. (The company also reaffirmed its FY18 guidance at the conference). About a week later, on the 22nd, ROK formally rejected EMR's bid, stating that the acquisition undervalues ROK and that it presents significant long-term risks to ROK shareholders.
Which brings us to today's news. After nearly five months of efforts, EMR has finally thrown in the towel and has withdrawn its acquisition proposal. In a testy note, EMR said that the merger would have delivered about $30 billion of value to ROK shareholders, and that it was disappointed the ROK Board "refused to even discuss the potential combination" of the companies.
In place of the acquisition, EMR now plans to accelerate its stock repurchases over the next month, buying back up to $1 billion over the next 12 months. As far as stock action goes, shares of ROK are virtually unchanged so far while EMR shares are trading higher by roughly 2%.