Shares of PTC (PTC) are rising after the company announced it had entered into an agreement for a strategic partnership with Rockwell Automation (ROK), in which Rockwell will make a $1B equity investment in PTC.

ROCKWELL TO INVEST $1B IN PTC: On Monday, PTC and Rockwell announced a strategic partnership that they say will accelerate growth for both companies. As part of the partnership, Rockwell will make a $1B equity investment in PTC and, when the deal closes, Rockwell's Chairman and Chief Executive Officer Blake Moret will join PTC's board of directors. The companies said in a statement, "The partnership will leverage 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 agreed to align their respective smart factory technologies and combine PTC's ThingWorx IoT, Kepware industrial connectivity, and Vuforia augmented reality platforms with Rockwell's FactoryTalk MES, FactoryTalk Analytics, and Industrial Automation platforms. Rockwell will make the 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. The price per share represents an 8.6% premium to PTC's closing stock price on June 8. Rockwell expects to fund the investment through a combination of cash on hand and commercial paper borrowings and will account for its PTC holding as an Available for Sale security. PTC intends to use the proceeds from the investment to repurchase stock to offset dilution. The deal is expected to close within 60 days.

WHAT'S NOTABLE: Rockwell also announced that it is increasing its share repurchase target for the fiscal year 2018 to $1.5B, representing a $300M increase to its previous plans to repurchase $1.2B of its stock.

ANALYST COMMENTARY: JPMorgan analyst Sterling Auty said he views Rockwell's investment in PTC as a strategic positive for PTC saying it will "help open the doors into thousands of companies" that traditionally have not used PTC for its core computer-aided design capabilities. The analyst finds it interesting that Rockwell did not simply acquire the entire company rather than settling for a minority investment in PTC. Auty adds that the partnership brings together two of the strongest players in industrial technology and the agreement will enable PTC to gain access to several industrial verticals including oil and gas, pharmaceutical and even portions of consumer package goods. The analyst kept a Neutral rating on shares of PTC.

PRICE ACTION: PTC rose 6.3% to $92.50 in morning trading, while Rockwell was up about 1% to $179.39.