Rockwell Automation, PTC Deal Driven by Digital Transformation

Rockwell Automation and PTC announced on June 11,2018 that they have entered into a definitive agreement for a strategic partnership  that is expected to accelerate growth for both companies by providing an integrated information solution to customers seeking to transform their physical operations with digital technologies.  As part of the partnership, Rockwell Automation will make a $1 billion equity investment in PTC, and Rockwell Automation’s Chairman and CEO, Blake Moret, will join PTC’s board of directors effective with the closing of the equity transaction.

The partnership leverages both companies’ resources, technologies, industry expertise, and market presence, and will include technical collaboration across the organizations as well as joint global go-to-market initiatives.  In particular, PTC and Rockwell Automation have agreed to align their respective smart factory technologies and combine PTC’s ThingWorx IoT, Kepware industrial connectivity, and Vuforia augmented reality (AR) platforms with Rockwell Automation’s FactoryTalk MES, FactoryTalk Analytics, and Industrial Automation platforms.  The result will be an integrated information solution that will help its customers to achieve increased productivity, heightened plant efficiency, reduced operational risk, and better system interoperability.  Rockwell Automation’s solutions business will be a preferred delivery and implementation provider, supported by an ecosystem of partners that both companies have established.  The strength of both companies across geographies, end markets, and applications is complementary.

Rockwell Automation’s $1 Billion Investment Takes Partnership with PTC to the Next Level

Under the terms of the agreement relating to the equity investment, Rockwell Automation will make a $1 billion equity investment in PTC by acquiring 10,582,010 newly issued shares at a price of $94.50, representing an approximate 8.4% ownership interest in PTC based on PTC’s current outstanding shares pro forma for the share issuance to Rockwell Automation.  The price per share represents an 8.6% premium to PTC’s closing stock price on June 8, 2018, the last trading day prior to the announcement.  Rockwell Automation intends to fund the investment through a combination of cash on hand and commercial paper borrowings.  Rockwell Automation will account for its ownership interest in PTC as an Available for Sale security, reported at fair value. PTC intends to use the proceeds from the equity investment to repurchase stock to offset dilution.  The investment transaction is subject to customary closing conditions and regulatory approvals, and is expected to close within 60 days of the announcement.

More Digital Transformation Solutions Further Accelerate the Connected Enterprise

This partnership with PTC will help Rockwell Automation to add to and enhance its solutions to help its customers move forward with digital transformation and continue on the path towards “The Connected Enterprise”. ARC sees this partnership playing a major role in the co-innovation development process for future new solutions and key functionalities, including enhancing solutions for execution, advanced analytics, and optimization. As a result, Rockwell Automation can now better leverage its Integrated Architecture installed base to serve as the foundation infrastructure for this new integrated information solution containing IIoT, advanced analytics, and AR technologies. Incorporating and utilizing Rockwell Automation’s industry application experience along with the solutions derived from this partnership can also help to proactively impact the plant floor performance of its existing installed base, regardless of whether the solutions are deployed at the device, control, edge, or cloud levels.    As a result, its customers will have a more intimate knowledge of their real-time data and its role and context throughout their operations.

Customers Can Create a Digital Roadmap to Help Obtain Funding

Customers leveraging digital transformation solutions incorporating IT/OT convergence, IIoT, advanced analytics, and AR technologies are likely to experience productivity and profitability increases that should provide a quick return on investment.  This by itself should make this Rockwell Automation and PTC partnership a success, providing its customers with value that is greater than the sum of its parts. But for customers seeking help to create a process to obtain the internal financial justification approvals for CAPEX or OPEX funding, they should first build a digital roadmap to provide direction for their digital transformation.  A digital roadmap is the governing document that dictates how technology will support a company’s business strategy and help drive businesses priorities over the next three to five years.  Digital roadmap characteristics include defining a strategy with a list of business priorities; defining IT/OT convergence goals with a potential timeline; getting executive-level support and buy-in; achieving consensus within the business; and specifying actionable projects with owners, value, cost, and payback.  As opposed to the traditional point-solution approach that often creates pockets of value that tend to resist integration with the neighboring value-chain functions, Rockwell Automation customers that build a digital roadmap will be in a good position to obtain funding to move forward with their digital transformation process to ultimately fulfill “The Connected Enterprise” vision, with the digital roadmap helping with the justification of digital transformation solutions, such as this new integrated information solution as a result of the PTC partnership.