Siemens expects to grow in North America, Asia Pacific with RuggedCom deal
RuggedCom Inc. would have liked to grow on its own, but was forced to seek a White Knight bidder after a hostile takeover offer in December put the company in play, chairman Peter Crombie said Monday.
Crombie made the comment after announcing RuggedCom had accepted a white knight bid by Siemens Canada Ltd., a subsidiary of German-based electronics giant Siemens Co..
The Siemens bid of $33 per share, or about $383 million, easily topped the hostile offer from St. Louis-based Belden Inc., which said it would allow its offer of $22 per share or roughly $272.4 million to expire.
"While RuggedCom is a strong and innovative company with a talented team, we do not believe that matching the competing offer is in the best interest of Belden shareholders,” said president and CEO John Stroup.
"We will pursue other opportunities that we believe can create greater value for our shareholders and support the continued growth, success and market leadership of our industrial networking business.”
Shares in RuggedCom shot up 25 per cent or $6.56 to $32.81 in trading on the Toronto Stock Exchange
"The special committee worked very diligently to get the best value out of this situation for the shareholders,” Crombie said, adding that the acquisition of his company will give Siemens a bigger footprint in the North American and Asia-Pacific markets.
RuggedCom currently provides customers there with its signature network equipment designed suited for harsh environments.
"Over the long term, I would see the operation that is currently RuggedCom to actually grow significantly,” Crombie added.
Robert Hardt (above), president and chief executive of Siemens Canada, also said the acquisition increases the global company’s reach in the North America and in the Asia-Pacific, which currently accounts for 24 per cent of its sales.
He noted that Siemens is already strong in industrial automation and communications in Europe and Asia.
"When you combine that and all of the sales channels, it makes a lot of sense for us to really integrate RuggedCom into our operations,” Hardt said.
The growth potential to supply network equipment that works in harsh environments worldwide is about US$618 million and the annual growth rate is 12.5 per cent or more, he said.
"It’s a very attractive market segment for us.”
Hardt said Siemens’ product lines with be combined with those of RuggedCom’s and its operations in Concord, Ont., will also be used for research and development.
RuggedCom has annual revenues of about US$94 million and 360 employees.
RuggedCom had rejected the Belden bid as opportunistic and had set up a so-called poison pill defence to thwart the transaction and seek alternatives.
Desjardins Financial analyst Maher Yagi said the Siemens offer is attractive for RuggedCom’s shareholders and comes after an extensive search by a special committee set up by the company’s board of directors.
"We believe that at C$33 per share the acquisition provides attractive value for RuggedCom shareholders and that it will be difficult for Belden to justify an accretive acquisition at a higher purchase price,” Yagi wrote in a research note.
RuggedCom, headquartered north of Toronto in the bedroom community of Concord, has about 40 per cent of its sales in North America, Crombie said.
The Canadian company provides equipment such as switches and routers that work in extreme environments with temperatures as low as -40 Celsius and as high as 85 C to transmit data from the field back to a company’s operations centre.
For example, RuggedCom’s equipment is used at electrical substations where there’s a high level of electromagnetic interference, as well as on warships, in the oil and gas industry and on trains to help avert collisions, Crombie said from Toronto.
The company’s equipment can also be used in traffic management to send data about traffic flows and on smart grids to let real-time sensors assess the electrical flow to help avoid blackouts, he added.
The Siemens bid provides for a $15-million penalty to be paid to the German electronics giant if the deal fails to close.
Crombie said the Siemens bid is 50 per cent higher than the Belden offer, has the unanimous support of the board and "provides fair value to our shareholders.”
Siemens said it expects to close the deal in late March.
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