Power provider nixes merger deal, for now

Monday, April 26, 2010 @ 05:04 PM gHale

With energy and power remaining key elements in the future, the need to keep companies on an even power keel is becoming more paramount throughout the industry. Sometimes that means consolidation, which means mergers.

In one case, that has not quite happened yet as UK secure power system company Chloride Group PCL said no to a $1.1 billion (£723) deal from industrial technology powerhouse Emerson Electric.

This was not Emerson’s first attempt at dealing for Chloride. St. Louis, Missouri-based Emerson approached Chloride two years ago. Integrating Chloride into the Emerson fold could create a global leader in secure power systems, which protect hospitals and airports from power cuts.

Chloride said the reason they rejected the offer is the company’s future seems stronger and they feel the current offer undervalues its true worth. Emerson has not made an official offer yet, but they could come back with a sweeter bid, analysts said.

Analysts at Seymour Pierce, Numis and Arbuthnot all moved the stock to a “buy” rating Monday. Officials at the broker Numis said a competing bid could emerge from Eaton Corp., a power-management company based in Ohio.

Emerson Chief Executive David Farr said his next step would be to begin talks with Chloride’s institutional shareholders about Emerson’s proposal.

In a letter to Chloride’s Chairman Norman Broadhurst, Emerson Chief Executive David Farr said Emerson has wanted to acquire Chloride for some time, and the company was “determined to explore all possibilities” to find a transaction that works.

Farr said the “smaller size and regional strategy of Chloride has left it without the geographic reach necessary to succeed in the longer term.” He added the combination of the two firms would create a stronger, global competitor. “The total [uninterruptible power supply, or UPS] market is worth more than $7 billion and Emerson has around 10% of that, and Chloride less,” Farr said.

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