Rockwell Automation, Inc. (ROK), a provider of industrial automation and digital transformation, inked an all-cash deal to buy Plex Systems for $2.22 billion. The transaction will be funded by short-term and long-term debt and is expected to close in the fiscal fourth quarter, subject to certain closing conditions. (See Rockwell Automation stock chart on TipRanks)
Plex Systems is a leading subscription-based smart manufacturing platform that helps customers connect, automate, track, and analyze their operations and connected supply chains. The company has over 700 customers and manages more than 8 billion transactions per day.
The deal will be immediately accretive to Rockwell’s operating margins and is expected to fast-track the achievement of its annual recurring revenue goal by approximately two years.
Blake Moret, the company’s Chairman and CEO, said, “This acquisition will accelerate our strategy to bring the Connected Enterprise to life, driving faster time to value for our customers, as they increasingly adopt cloud solutions to improve resilience, agility, and sustainability in their operations.”
Plex, which has 500 employees, will be integrated into Rockwell’s Software and Control operating segment. That segment provides leading hardware and software offerings for the design, operation, and maintenance of production automation and management systems.
Bill Berutti, CEO of Plex, said, “Joining forces with Rockwell is great for our customers, partners, and employees as we move to expand our reach and impact and accelerate our mission to bring manufacturing to the cloud.”
Following the news, Rosenblatt Securities analyst Scott Graham maintained a Hold rating on the stock with a price target of $260, implying a 9% downside potential from current levels.
Graham said, “We believe Plex fits well with ROK’s Factory Talk platform and its Connected Enterprise initiatives. Its sales are recurring. But $2.22B transaction value is a lot of capital deployment for a deal which will not move the earnings needle much in fiscal 2021 or fiscal 2022 in our estimation.”
Rockwell has an overall Hold consensus rating based on 3 Buys, 5 Holds, and 2 Sells. The average analyst Rockwell Automation price target of $264 implies a 7.6% downside potential to current levels. Shares gained 36.9% over the past year.
Also, according to TipRanks’ Smart Score system, ROK gets a 7 out of 10, which indicates that the stock is likely to perform in line with market averages.
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