Having just blogged last Thursday about the recent tactic by RuggedCom management’s to employ a ‘poison bill’ delay in order to search out more attractive suitors who might outbid Belden’s C$280 million (C$22/share) ‘hostile’ bid, little did I know that Siemens would act so quickly by agreeing to acquire RuggedCom for about C$382 million (C$33/share) on Monday.
The offer represents almost a 40% premium to Belden’s initial offer and certainly seemed a little rich to me. However since I did not have privy to RuggedCom’s real financials it is speculation on my part and I would give the folks at Siemens the benefit of the doubt that they can realize a decent ROI over the longer term. The real value of the acquisition is that it likely opens up the opportunity for Siemens to sell their larger portfolio of solutions to RuggedCom’s core markets of electric power (smart grid), transportation and military, markets for which over 90% of revenues are derived and for which Siemens lacks a strong presence.
Siemens was one of the potential suitors I blogged about back on 1/06/12 that may have been considered as an interested party in RuggedCom. However I must admit I did not view them as being on the top of my short list despite Siemens being one of the top 5 industry leaders in both the interconnect product and networking component segments comprising the industrial networking infrastructure products market.
In hindsight the acquisition does seem to fit with the rumors I am hearing during discussions with suppliers in the process level measurement markets who are constantly complaining about the tremendous amount advertising Siemens is spending to support products which these suppliers question are generating sufficient revenues to warrant such spending. Siemens’ Industry Automation Division had 2011 revenues well in excess of $8 billion and has traditionally lacked a really strong beachhead in the Americas and Asia-Pacific, at least in terms of its industrial networking presence.
Personally I see this acquisition creating a real horse race in the $3.7 billion industrial networking (wireline and wireless segment 2012 forecast) infrastructure markets with Cisco, Belden, now Siemens, Phoenix Contact, Moxa, Harting and Schneider Electric all battling it out in different product segments for control of a robustly (>20% CAGR) growing market. I do not expect Siemens to feel the near term need to realize as many "synergies" (i.e. layoffs) from the acquisition as Belden would have and believe that Siemens realizes that sometimes you have to spend money to make money.
2012 is already turning out to be an exciting year with my beloved New England Patriots battling the dreaded NY Giants for the Super Bowl this Sunday, the possibility of the nation electing a new President and the chance to see if my crystal ball on the dynamics impacting the industrial networking market will continue to be right on the mark.