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Honeywell acquisition of Measurex means stronger controls supplier

Pulp & Paper, Mar 1997 by Ole-Kristian Fadum

$600-million dollar deal combines the strengths of Honeywell's pulp mill controls and DCSs with Measurex's paper machine systems

HONEYWELL INC. AND MEASUREX CORP have reached an agreement, announced on January 27, to merge the two companies in an all-cash transaction valued at about $600 million, or about $35 per share. Honeywell will start a tender offer for all Measurex stock in an agreement approved by the board of directors of both companies.The merger is expected to be completed this month.

Honeywell has been very active in expanding its products for the pulp and paper industry.This has been achieved by a combination of internal developments as well as acquisitions.This latest proposed acquisition of Measurex will give Honeywell a very strong presence in the pulp and paper industry. It combines Honeywell's strength in distributed control systems (DCSs), pulp mill controls, and process control services with Measurex's strengths in sensor-based paper quality control systems (QCSs), paper machine actuators, and paper quality control services.

Markos Tambakeras, president of Honeywell Industrial Control, describes the merger between Honeywell and Measurex as outstanding synergy. We are extremely compatible. There is an uncanny similarity between the mission statements of Honeywell and Measurex.

The open "mix and match" approach is especially important for the North American and European paper makers. "I believe the merger will be good, because Measurex is a strong quality control supplier, while Honeywell is strong in DCS," commented Tom Grubb, director of information technology at Donohue Inc. He does not see a big impact on his mill.

The question of openness is important, and although not yet finalized,Tambakeras says Honeywell will "continue our tradition of offering all components to meet our customer's needs, as well as offering all the various components in an overall mill information and control system.This is no longer a world where we can afford to be parochial.An open strategy is needed."

Both Honeywell and Measurex have service revenues that exceed a third of their total revenues, and this is high for the industry. Measurex is a leader in services for quality control systems in the paper industry.

Honeywell is strong in general process control services, with 900 project engineers in its North American service organization that covers all industries. This is more people than all the engineering control consultants in North America combined.

"There is a trend toward increased outsourcing of services," says Tambakeras. "Honeywell will continue to be a major player in this area." MERGER OF THE COMPANIES. The merger of Honeywell and Measurex gives the combined company a springboard in Asia and Latin America to offer totally integrated systems for the new mills and paper machines being built there. Measurex's strength in quality management systems complements Honeywell's DCS presence. This will help as mills want to buy more integrated systems. Tambakeras sees Measurex's strength in Japan as especially important.

"We recognize the need to come to the market quickly with a unified organization and product offering," says Gingerich.

Honeywell already has a strong DCS focus on the paper industry. Now this will be combined with the very aggressive and entrepreneurial organization of Measurex. It will be interesting to watch as the two cultures seek a common value system and a common approach to the customers.

The speed of the transition to the new merged company will be critical to Measurex and Honeywell maintaining market share.The total process control market (not including transmitters, valves, and drives) in the pulp and paper industry worldwide was almost $1.5 billion in 1996, an increase of 13% over 1995, according to a July 1996 market survey by Fadum Enterprises Inc. called "Process Control in the Pulp and Paper Industry: A Worldwide Technology Assessment and Market Report."

Competitors are ready to take advantage of any confusion. ABB is the largest competitor, and it went through the same type of merger a few years ago as the Combustion Engineering/Taylor/AccuRay group was combined with ABB. This merger went well, with few effects on the customer, although ABB lost some market share in the transition.

Tambakeras sums up the merger this way: "The number one priority is the customer, as Honeywell and Measurex define their combined systems and service organizations. Honeywell will move rapidly on the merger to address the needs of customers in the area of products and support.'

Honeywell has a long history of customer support. New products, such as the TPS system, are backwards compatible with existing Total Distributed Control (TDC) systems. And TDC 3000 systems were compatible with TDC 2000. This will continue as the Honeywell and Measurex systems converge.

"This is not a takeover, it is a merger," says Tambakeras, to emphasize the point that the two companies are building a joint new company using the strengths from both.The merger will allow for continuous investment in research and development of paperspecific sensors and DCS systems.The focus is to have an across-the-mill offering which covers all the important areas from sensors to control and management information and from the woodyard to shipping.

OLE-KRISTIAN FADUM is president and CEO of Fadum Enterprises Inc., Boulder, Colo.

Ole-Kristian Fadum "Honeywell acquisition of Measurex means stronger controls supplier". Pulp & Paper. 23 Dec, 2010.
Copyright Miller Freeman Inc. Mar 1997
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