Transformative Step in Emerson’s Portfolio
Journey Towards a Cohesive, Higher Growth and Higher Margin
Portfolio
Emerson to Become a Pure-Play Global Automation
Company Serving Diversified End Markets
Blackstone to Help Power Next Phase of Growth
for Climate Technologies
Emerson to Host Conference Call Today at 7:00
a.m. Central Time
Emerson (NYSE: EMR) today announced a definitive agreement under
which it will sell a majority stake in its Climate Technologies1
business to private equity funds managed by Blackstone
(“Blackstone”) in a transaction valuing Climate Technologies at
$14.0 billion. Emerson will receive upfront, pre-tax cash proceeds
of approximately $9.5 billion while retaining a non-controlling
ownership interest in a new standalone joint venture.
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the full release here:
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The standalone Climate Technologies business includes the
market-leading Copeland compressor business and the entire
portfolio of products and services across all HVAC and
refrigeration end-markets, representing approximately $5.0 billion
of fiscal 2022 sales.
The transaction marks a significant milestone in Emerson’s
journey to create a higher value, cohesive industrial technology
portfolio and to become a pure-play global automation company
serving a diversified set of end markets. Emerson, together with
AspenTech, has the industry’s most comprehensive portfolio of
advanced automation technologies and software.
As a pure-play automation company, Emerson will be positioned
for higher growth, with strong, differentiated capabilities to help
customers pursue their sustainability and productivity objectives
in process, hybrid and discrete industries. The Emerson portfolio
is aligned with many of the world’s secular growth drivers,
including digital transformation, sustainability and
decarbonization, and nearshoring. Following completion of the
transaction, Emerson is expected to have industry leading margins,
strong free cash flow generation and will continue to leverage
Emerson’s management process and operating discipline.
Management Comments
“Today’s announcement is a definitive step in the portfolio
journey we embarked on when I became CEO in early 2021,” said Lal
Karsanbhai, President and Chief Executive Officer of Emerson. “Over
the past 18 months, the Emerson team has accelerated our portfolio
transformation, divesting non-core businesses including
InSinkErator and Therm-O-Disc, while investing in organic growth
opportunities and important transactions including AspenTech. Our
journey has been with clear purpose – to drive growth and
significant value creation for our shareholders by creating a
leading global automation company. Our differentiated capabilities
in intelligent devices and software, and the focus, cohesiveness
and operating agility of a pure-play company, will allow Emerson to
bring our comprehensive automation products and solutions to a
diverse set of end markets.”
“This transaction enables Emerson to partially monetize our
Climate Technologies business at an attractive valuation and
provides significant upfront cash proceeds to invest in growth,
while at the same time enabling Emerson to participate in Climate
Technologies’ upside potential upon exit of our non-controlling
position,” continued Mr. Karsanbhai. “We are excited to partner
with Blackstone given its successful history of value creation in
collaboration with corporate partners. We look forward to working
closely with Blackstone to ensure a smooth transition for Climate
Technologies’ employees and customers.”
Joe Baratta, Global Head of Blackstone Private Equity,
commented, “Blackstone has a long and successful track record of
large-scale corporate partnerships, a key pillar of our investment
strategy. This is a marquee transaction for our private equity
business and a testament to our ability to deliver solutions to our
partners even in difficult economic and market environments. We are
proud to be partnered with Emerson to help drive the next stage of
growth for this great business. Copeland is the market leader in
supplying critical components for residential, commercial and
refrigeration climate control systems. The business is poised for
accelerated growth as it leads the way in helping consumers and
businesses shift to more energy-efficient heating and cooling
products as part of their carbon reduction efforts. We are thrilled
to back the business’ dedicated team as they continue to innovate
and deliver energy-efficient solutions to their customers."
Transaction Details
Climate Technologies had fiscal 2022 net sales of $5.0 billion,
pre-tax earnings of $1.0 billion and EBITDA2, including standalone
costs, of $1.1 billion. The transaction values Climate Technologies
at $14.0 billion, representing a multiple of 12.7x fiscal 2022
EBITDA2, including standalone costs. Emerson will receive upfront,
pre-tax cash proceeds of approximately $9.5 billion and a note of
$2.25 billion at close and retain 45% common equity ownership of
the standalone Climate Technologies business, which will be
structured as a joint venture between Emerson and Blackstone, until
its potential sale or IPO. The cash consideration will be funded by
$5.5 billion of fully committed debt financing ($6.2 billion
inclusive of an unfunded ABL facility) and $4.4 billion of equity
contribution from Blackstone. A wholly owned subsidiary of the Abu
Dhabi Investment Authority (ADIA) and GIC will invest alongside
Blackstone as part of the transaction.
Emerson expects to invest the proceeds from the transaction in
strategic M&A to strengthen and diversify its automation
portfolio in four targeted adjacent markets, which will be
discussed at Emerson’s investor conference on November 29, 2022.
Emerson also expects to continue to return cash to shareholders
through share repurchases, expected to be approximately $2 billion
in 2023, and its dividend.
Timing and Other Details
The transaction has been unanimously approved by Emerson’s Board
of Directors and is expected to close in the first half of the
calendar year 2023, subject to regulatory approvals and customary
closing conditions.
Operating results for Climate Technologies, and previously
announced divestitures, InSinkErator, which is expected to close
later today, and Therm-O-Disc, will be reported in discontinued
operations in the first fiscal quarter of 2023. Included in
Emerson’s continuing operations will be Automation Solutions,
Safety & Productivity, and AspenTech.
As part of the transaction, Emerson will be right sizing its
corporate and platform cost structure and will sell ownership of
its St. Louis, Missouri campus to the joint venture. Emerson will
enter a three-year lease on the headquarters with an option to
extend a further two years. During that time, Emerson will
undertake a comprehensive assessment of potential headquarters
locations.
Emerson Fourth Quarter and Full Year 2022 Results
Emerson will be reporting financial results for its fourth
quarter and fiscal year 2022, ended September 30, 2022, and
providing guidance for its fiscal 2023 year in a separate press
release to be issued today.
Upcoming Investor Events
Today, beginning at 7:00 a.m. Central Time / 8:00 a.m. Eastern
Time, Emerson management will discuss the transaction, and fourth
quarter and fiscal year 2022 results, during an investor conference
call. Participants can access a live webcast available at
www.Emerson.com/en-us/investors at the time of the call. A replay
of the call will be available for 90 days. Conference call slides
will be posted in advance of the call on the company website.
Emerson will hold an in-person and virtual investor conference
on Tuesday, Nov. 29 in New York City. A live webcast of the
investor conference will begin at 8:00 a.m. Central Time / 9:00
a.m. Eastern Time. A link to register and attend the webcast is
available at www.Emerson.com/en-us/investors. The webcast will
remain available for 90 days.
Advisors
Centerview Partners LLC and Goldman Sachs & Co. LLC are
serving as financial advisors to Emerson, and Davis Polk &
Wardwell LLP is serving as legal counsel. Barclays served as lead
financial advisor to Blackstone. Guggenheim Securities, LLC and
Evercore also provided financial advisory services to Blackstone.
The ABL revolver and TLA portion of the debt financing related to
the transaction is led by RBC Capital Markets, LLC, Wells Fargo and
SMBC. Additional financing is provided in the form of a private
Term Loan by a consortium of lenders. Simpson Thacher &
Bartlett LLP is acting as legal counsel to Blackstone.
About Emerson
Emerson (NYSE: EMR) is a global technology and software company
providing innovative solutions for the world’s most essential
industries. Emerson is an automation leader that helps process,
hybrid and discrete manufacturers optimize operations, protect
personnel, reduce emissions and achieve their sustainability goals
through its unmatched automation portfolio, including its majority
stake in AspenTech. For more information, visit Emerson.com.
About Blackstone
Blackstone is the world’s largest alternative asset manager. We
seek to create positive economic impact and long-term value for our
investors, the companies we invest in, and the communities in which
we work. We do this by using extraordinary people and flexible
capital to help companies solve problems. Our $951 billion in
assets under management include investment vehicles focused on
private equity, real estate, public debt and equity,
infrastructure, life sciences, growth equity, opportunistic,
non-investment grade credit, real assets and secondary funds, all
on a global basis. Further information is available at
www.blackstone.com. Follow @blackstone on LinkedIn, Twitter, and
Instagram.
Forward-Looking and Cautionary Statements
Statements in this press release that are not strictly
historical may be “forward-looking” statements, which involve risks
and uncertainties, and Emerson undertakes no obligation to update
any such statements to reflect later developments. These risks and
uncertainties include the Company's ability to successfully
complete on the terms and conditions contemplated, and the
financial impact of, the proposed Climate Technologies transaction,
the proposed sale of its InSinkErator food waste disposal business,
the scope, duration and ultimate impacts of the COVID-19 pandemic
and the Russia-Ukraine conflict, as well as economic and currency
conditions, market demand, including related to the pandemic and
oil and gas price declines and volatility, pricing, protection of
intellectual property, cybersecurity, tariffs, competitive and
technological factors, inflation, among others, as set forth in the
Company's most recent Annual Report on Form 10-K and subsequent
reports filed with the SEC.
1Climate Technologies refers to the reported segment excluding
Therm-O-Disc, divestiture closed May 2022.
2EBITDA, including standalone costs, of $1.1 billion was
adjusted by the following: $0.15 billion of depreciation and
amortization expense and $0.05 billion of standalone costs to
arrive at pretax earnings of $1.0 billion.
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version on businesswire.com: https://www.businesswire.com/news/home/20221030005042/en/
For Emerson:
Investors: Colleen Mettler (314) 553-2197
Media: Joseph Sala / Tanner Kaufman Joele Frank,
Wilkinson Brimmer Katcher (212) 355-4449
Charlotte Boyd FleishmanHillard (952) 994-8607
For Blackstone:
Matt Anderson Matthew.Anderson@blackstone.com (212) 390-2472
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