Rotork's Data-Center Surge and ABB's Takeover Offer Define a Resilient H1

CPI's data-center momentum and a 506p cash bid highlight strategic value even as Middle East disruption weighs on oil & gas.

ROR.L · Earnings Call · 2026-08-04

An Offer, and a Result, That Speak to a Changed Company

When Rotork reported its first-half 2026 results on 4 August, the market already knew the headline: ABB had agreed to acquire the company for 506p per share, a 73% premium to the undisturbed price. The offer, which values Rotork at roughly 19.5x EV/EBITDA, is a striking endorsement of the transformation CEO Kiet Huynh has overseen since 2022. But the results themselves — and particularly the performance of the data centers-driven CPI division — explain why ABB is willing to pay up. Data centers were the standout theme of the call. Huynh was unapologetic: "CPI knocked out of the park in the first half as we had expected." The division delivered mid-teens revenue growth, and within it, Critical HVAC "doubled in the half" to reach about 6% of group revenue. Even excluding data centers, critical HVAC sales nearly doubled, underscoring that this is not a one-off contract win but a structural shift in demand. Huynh cited liquid cooling projects inside the server room, enabled by the recently acquired Handby and NOA product lines, as clear wins: "We've done very well outside of liquid cooling, but we have won a number of projects inside the server room with liquid cooling." The target segment strategy, which focuses on faster-growing end markets like data centers, specialty chemicals, and water treatment, is paying off handsomely. First-half target segment sales grew 10% OCC, and Rotork Service – now 24% of group sales – continued to outpace the group. This is the "greater balance" Huynh referenced when he said that "in previous cycles, these issues would have had a much bigger effect." The issues he means: the Middle East conflict that has disrupted oil & gas orders and supply chains, and the consequent weakness in upstream and midstream spending.

Oil & Gas Drag, But a Clear Path to Recovery

Oil and gas sales fell 8.4% in the half, hit by the conflict and its downstream consequences — feedstock shortages in India and China, for instance. Yet Huynh was cautiously optimistic: "In terms of the Middle East, what we saw in Q2 were things improving as the quarter went on... we did see a month-on-month improvement in the rolling orders going up." The division still grew in the Americas, helped by downstream and LNG demand, and management expects a "more gradual recovery" in H2. The resilience of the group is visible in the margin performance: adjusted operating margin rose 60 basis points on a constant-currency basis to 22.4%, with CPI's margin up 170 bps to 24.7%. Cash conversion was 79%, and return on capital employed remained at a peer-leading 37%.

In previous cycles, these issues would have had a much bigger effect. The outstanding performance from CPI, in particular, highlights the benefits of the changes we have made under Growth+ and the greater balance we have built into the group.
Kiet Huynh, Chief Executive Officer · 2026-08-04

That balance is precisely what ABB is buying. The interim dividend was raised 1.7% to 3p, and the offer includes that dividend on top of the 503p cash — a signal that the board views the underlying business as durable. The near-term outlook for CPI is now stronger than originally guided, with data center demand continuing to accelerate, while Water & Power is on track and oil & gas is gradually stabilizing.

The Takeover, the Tape, and the Meaning for Shareholders

While Rotork's own tape shows no price data in our context, the broader market's reaction to data-center names has been choppy over the past month — semiconductor and AI hardware stocks have corrected on valuation fears. Rotork, however, offers a less crowded way to play the same theme: its data centers exposure runs through critical HVAC and process automation, not through chips or memory. That differentiation makes the ABB bid even more logical: the acquirer gains a high-margin, cash-generative franchise with recurring service revenue and a leadership position in a market that is still in the early innings of liquid-cooling adoption. For investors, the offer at 506p sets a floor, but the question now is whether a competing bid emerges or whether regulators force concessions. The scheme document is expected within 28 days of the original announcement, and completion is targeted for H1 2027. Until then, management remains in an offer period and can only comment on public information. But the underlying business performance is anything but static. The target segment engine is running hot, and even in a period of Middle East disruption, the company expanded margins and returned capital. That is why ABB is willing to pay a 73% premium — and why Rotork's shareholders, whatever happens next, are sitting on a very different company than the one that entered 2022.