Emerson Electric (EMR) Announces Key Actions to Complete the Portfolio Transformation
Emerson (NYSE: EMR) today announced three key strategic and financial actions in the final phase of its portfolio transformation to an industrial technology leader focused on automation:
- Emerson has made a proposal to acquire all outstanding shares of common stock of AspenTech (NASDAQ: AZPN) ("AspenTech") not already owned by Emerson for
$240 per share in cash. The proposed transaction follows Emerson's 55% majority investment in AspenTech, which was completed in 2022. Emerson currently owns approximately 57% of AspenTech's outstanding shares of common stock. Upon completion of the transaction, AspenTech would become a wholly owned subsidiary of Emerson. - Emerson has commenced a process to explore strategic alternatives, including a cash sale, for the Safety & Productivity segment, which comprises the remaining businesses not related to automation in Emerson's portfolio.
- Emerson plans to repurchase approximately
$2.0 billion of its common stock in fiscal year 2025, with approximately$1.0 billion of the repurchase expected to be completed in the first quarter of fiscal year 2025.
"Emerson has been executing against a clear value creation roadmap as we build the most differentiated global industrial technology portfolio of software-defined and hardware-advantaged automation solutions," said Lal Karsanbhai, President and Chief Executive Officer of Emerson. "The key strategic actions we are announcing today are consistent with our objective to drive value for our shareholders and complete our portfolio transformation in the most financially attractive way. Upon the successful completion of these actions, Emerson will have created a cohesive automation portfolio which strengthens our innovation leadership in the market and positions Emerson to deliver further growth, margin expansion and shareholder value creation."
Proposal to Acquire Remaining Outstanding Shares of AspenTech
Emerson's proposed
The proposal implies a fully diluted market capitalization for AspenTech of
Karsanbhai continued, "Since completing our initial investment in 2022, our partnership with AspenTech has been highly productive and advanced our capabilities in software-defined control. The strategic and operating success of our partnership with AspenTech over the last two years gives us confidence that the time is right to bring Emerson and AspenTech together. As one company, with shared priorities and investment, we will be even better positioned for growth, margin expansion and shareholder value creation."
The combination of Emerson and AspenTech would advance key initiatives, create new opportunities through full integration as a single company and further accelerate Emerson's industrial software strategy with benefits including:
- Accelerates Realization of Software-Defined Control: Developments over the last 3 years have proven the value and feasibility of software-defined control. A single integrated organization would benefit Emerson as it designs seamless hardware plus software solutions for its customers.
- Enhances Alignment Between Emerson and AspenTech for Additional Synergy Realization: As a single company leveraging the proven Emerson Management System, there will be opportunities for immediate additional cost efficiencies from the transaction. Commercially, the proposed transaction drives greater alignment, collaboration and integration, to allow Emerson and AspenTech to invest, innovate and cross-sell more effectively and drive further sales synergies over time.
- Strengthens Combined Automation Software Offering: As a single integrated business, Emerson will have a highly differentiated automation software business globally with software addressing the entire lifecycle of automating complex operations, from design and engineering to production and asset optimization.
Emerson expects the impact of this proposed transaction with synergies to be neutral to Adjusted EPS in fiscal 2025.
Emerson has delivered its proposal in a letter to AspenTech's Board of Directors, filed with the SEC, and copied below. The proposal does not create any binding legal obligation between Emerson and AspenTech unless and until mutually acceptable definitive transaction documents are executed.
Emerson will not proceed with such a transaction unless a fully empowered special committee, comprising solely independent and disinterested directors appointed by AspenTech's Board of Directors and advised by independent legal and financial advisors, recommends approval of such transaction to the AspenTech Board. Emerson's proposal is that the transaction be effected by a tender offer that would be subject to a non-waivable condition that at least a majority of the AspenTech common stock held by minority stockholders be tendered and not withdrawn in accordance with the framework established under Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) and its progeny; and thereafter a merger consummated at the same price without further stockholder action.
The proposal is not subject to any financing condition and would be financed from cash on hand, committed lines of credit and/or other available sources of financing. No assurance can be given whether the proposal will lead to a transaction or as to any of the terms or conditions of such transaction. Emerson does not intend to make further announcements, beyond the conference call, regarding the proposal until such time as a definitive agreement is reached or if further disclosure is appropriate or necessary.
Exploring Strategic Alternatives for Safety & Productivity Segment
Emerson also announced today that it is exploring strategic alternatives for its Safety & Productivity segment, including a cash sale, to maximize shareholder value. The segment, which includes Emerson's legacy tools businesses, contributed
There is no deadline or definitive timetable set for completion of the strategic alternatives process or assurance that the process will result in any transaction. Emerson does not intend to make further announcements regarding the review of strategic alternatives, beyond the conference call, unless and until the Board approves a specific transaction or otherwise determines further disclosure is appropriate or necessary.
Increasing Return of Capital to Shareholders
Emerson also announced today that it plans to repurchase approximately
The announced repurchase underscores Emerson's commitment to driving shareholder returns and confidence in the company's strong outlook, significant free cash generation and benefits of the actions announced today. Assuming successful completion of the transactions, Emerson expects total net leverage to be less than 2x by the end of fiscal year 2025 and expects to maintain its A2/A credit rating.
Emerson Fourth Quarter and Full Year 2024 Results
In a separate press release this morning, Emerson announced financial results for its fourth quarter and fiscal year 2024, ended
As previously announced, beginning at
Advisors
Goldman Sachs & Co. LLC and Centerview Partners LLC are serving as financial advisors to Emerson, and Davis Polk & Wardwell LLP is serving as legal advisor.