St. LOUIS AND NEW YORK–(BUSINESS WIRE)–October 31, 2022–
Emerson (NYSE: EMR) today announced that it has entered into a definitive agreement to sell a controlling interest in its Climate Technologies 1 business to private equity funds managed by Blackstone (“Blackstone”), in a transaction that values Climate Technologies at 14, 0 billion dollars. Emerson will receive upfront pre-tax cash proceeds of approximately $9.5 billion while retaining a non-controlling ownership interest in the new standalone joint venture.
Climate Technologies’ stand-alone business includes Copeland’s market-leading compressor business and its entire portfolio of products and services across all air conditioning, heating, air conditioning and refrigeration end markets, generating approximately $5.0 billion in fiscal 2022 sales.
The transaction marks a major milestone in Emerson’s journey to build a cohesive portfolio of industrial technologies with greater value and to become a pure global automation company serving a diverse set of end markets. Emerson, together with AspenTech, has the industry’s broadest portfolio of advanced automation technologies and software.
As a purely automation company, Emerson will expect higher growth rates with strong differentiated capabilities to help customers achieve sustainability and productivity goals in the technology, hybrid and discrete industries. Emerson’s portfolio is aligned with many of the world’s secular growth drivers, including digital transformation, sustainable development and decarbonization, and offshoring. Upon completion of the transaction, Emerson is expected to enjoy industry-leading profitability, free cash flow generation and continue to leverage Emerson’s management process and operational discipline.
“Today’s announcement is the final step in the portfolio journey we began 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 the transformation of our portfolio, 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 a clear objective – to drive growth and create significant value for our shareholders by building a leading global automation company. Our differentiated capabilities in intelligent devices and software, as well as the focus, cohesion and operational flexibility of a pure company, will enable Emerson to offer our end-to-end automation products and solutions to diverse end markets.”
“This transaction allows Emerson to partially monetize our Climate Technologies business at an attractive valuation and provides significant upfront cash to invest in growth, while allowing Emerson to participate in the growth potential of Climate Technologies after exiting our non-controlling position. ,” Mr. Karsanbhai continued. “We are excited to partner with Blackstone given its successful history of creating value 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 Barata, 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 landmark transaction for our private equity business and a testament to our ability to provide solutions to our partners even in challenging economic and market conditions. We are proud to partner with Emerson to help take this great business to the next stage of growth. Copeland is a market leader in supplying critical components for residential, commercial and refrigeration climate control systems. The business is poised for accelerated growth as it helps consumers and businesses switch to more energy efficient heating and cooling products as part of their carbon reduction efforts. We are delighted to support the business’s dedicated team, which continues to innovate and provide energy-efficient solutions to its customers.”
Climate Technologies had fiscal 2022 net sales of $5.0 billion, pretax income of $1.0 billion, and EBITDA 2, including standalone costs, of $1.1 billion. The deal values Climate Technologies at $14.0 billion, representing a multiple of 12.7x fiscal 2022 EBITDA 2, including stand-alone costs. Emerson will receive upfront pre-tax cash proceeds of approximately $9.5 billion and a $2.25 billion note at closing and will retain a 45% total ownership interest in the standalone Climate Technologies business, which will be structured as a joint venture between Emerson and Blackstone , while its potential sale or IPO. The cash consideration will be funded by US$5.5 billion in fully committed debt financing (US$6.2 billion including unfunded ABL) and US$4.4 billion in equity contributions from Blackstone. A subsidiary of Abu Dhabi Investment Authority (ADIA) and GIC will invest alongside Blackstone as part of the deal.
Emerson expects to invest the proceeds of the transaction in strategic mergers and acquisitions to strengthen and diversify its automation portfolio in four target adjacent markets, which will be discussed at the Emerson Investor Conference on November 29, 2022. Emerson also expects to continue to return cash to shareholders through share repurchases that , expected to be around $2 billion in 2023, and its dividend.
The transaction has been unanimously approved by Emerson’s Board of Directors and is expected to close in the first half of calendar year 2023, subject to regulatory approval and customary closing conditions.
The operating results of Climate Technologies and the previously announced divestments, InSinkErator, which is expected to close today, and Therm-O-Disc, will be listed as discontinued operations in the first fiscal quarter of 2023. Emerson’s list of continuing operations will include Automation Solutions, Security and Productivity and AspenTech.
As part of the deal, Emerson will restructure its enterprise and platform costs and sell ownership of its campus in St. Louis, Missouri to the joint venture. Emerson will enter into a three-year lease for the headquarters with an option to renew for another two years. At that time, Emerson will conduct a comprehensive evaluation of potential headquarters locations.
Emerson’s fourth quarter and full year 2022 results
Emerson will report financial results for the fourth quarter and fiscal year 2022 ended September 30, 2022, and provide guidance for fiscal year 2023 in a separate press release to be issued today.
Beginning at 7:00 a.m. Central Time / 8:00 a.m. Eastern Time, Emerson management will discuss the transaction as well as fourth quarter and fiscal 2022 results during a conference call for investors today. Members can access the live webcast at www.Emerson.com/en-us/investors at the time of the call. Redial will be available for 90 days. The conference call slides will be posted on the company’s website prior to the call.
Emerson will hold an in-person and virtual conference call for investors on Tuesday, November 29 in New York. A live webcast of the investor conference call will begin at 8:00 a.m. Central Time / 9:00 a.m. Eastern Time. The link to register and participate in the webcast is available at www.Emerson.com/en-us/investors. The webcast will be available for 90 days.
Centerview Partners LLC and Goldman Sachs & Co. LLC is acting as financial advisor to Emerson and Davis Polk & Wardwell LLP is acting as legal advisor. Barclays served as lead financial advisor to Blackstone. Guggenheim Securities, LLC and Evercore also provided financial advisory services to Blackstone. The portion of the ABL revolver and TLA debt financing related to the transaction is being provided by RBC Capital Markets, LLC, Wells Fargo and SMBC. Additional financing is provided by a consortium of lenders in the form of a private term loan. Simpson Thacher & Bartlett LLP is acting as legal advisor to Blackstone.
Emerson (NYSE: EMR) is a global technology and software company that provides innovative solutions to the world’s most important industries. Emerson is a leader in automation, helping process, hybrid and discrete manufacturers optimize operations, protect personnel, reduce emissions and achieve sustainability goals through its unmatched portfolio of automation tools, including a larger stake in AspenTech. For more information visit Emerson.com.
Blackstone is the world’s largest alternative asset management company. We strive to create positive economic impact and long-term value for our investors, the companies in which we invest and the communities in which we operate. 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 targeting private equity, real estate, government debt and equity, infrastructure, life sciences, capital growth, non-investment grade opportunistic credit, real assets and secondary funds, all on on a global basis. More information is available at www.blackstone.com. Follow @blackstone next LinkedIn, Twitterand Instagram.
Forward-looking and cautionary statements
Statements in this press release, which are not strictly historical, may be “forward-looking” statements that involve risk and uncertainty, and Emerson undertakes no obligation to update such statements to reflect future events. These risks and uncertainties include the Company’s ability to successfully complete on the planned terms, as well as the financial implications of the proposed Climate Technologies transaction, the proposed sale of InSinkErator’s food waste disposal business, the scope, duration and ultimate effects of the COVID-19 pandemic and the Russian-Ukrainian conflict , as well as economic and currency conditions, market demand, including related to the pandemic and the decline and volatility of oil and gas prices, pricing, intellectual property protection, cyber security, tariffs, competition 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.
1 Climate Technologies refers to the reportable segment, excluding Therm-O-Disc, the sale of which is completed in May 2022.
2 EBITDA including stand-alone costs of $1.1 billion was adjusted for the following: $0.15 billion of depreciation expense and $0.05 billion of stand-alone costs to arrive at pre-tax income of $1.0 billion.
CONTACT: For Emerson: Investors:
Joseph Sala / Tanner Kaufman
Joel Frank, Wilkinson Brimmer Catcher
(212) 355-4449Charlotte Boyd
(952) 994-8607 For Blackstone: Matt Anderson
KEY WORD: USA NORTH AMERICA NEW YORK MISSOURI
INDUSTRY KEYWORDS: SOFTWARE, TECHNOLOGY, ELECTRONIC DESIGN, AUTOMATION
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PUB: 31.10.2022 06:31 / DISK: 31.10.2022 06:32