Emerson Electric Co (EMR.N) will sell a controlling stake in its climate technologies unit to Blackstone Inc (BX.N) in a deal that values the business at $14 billion, as the U.S. industrial firm turns to supplying to a growing automation market.
The company will get an advance payment of about $9.5 billion, it said on Monday, which it will use to take up more firms, particularly in the automation segment. Emerson’s shares went up 1% in a weak broader market as the company also surpassed fourth-quarter revenue and earnings.
Businesses are scaling up their efforts to automate their operations amid a shortage of factory staff, and Emerson has pushed ahead on its software strategy to capture that shift. The company disposed of its division that builds hot water dispensers and waste disposal equipment to Whirlpool Corp (WHR.N) and combined its software units with smaller rival Aspen Technology (AZPN.O).
Emerson, which will keep about a 45% stake in the climate tech unit, said Blackstone and co-investors Singapore state fund GIC and Abu Dhabi Investment Authority would provide $4.4 billion in equity toward the deal, which would be added to $5.5 billion of debt financing.
Citi Research analysts said:
“(Emerson) is significantly re-orienting its portfolio to result in a more focused and potentially higher growth enterprise.”
This deal, likely to complete in the first half of next year, is the latest in a string of private equity transactions in 2022 as a selloff in equities on recession worries hurt valuations. The Climate Technologies business, which will be set up as a joint venture, produced net sales of $5 billion in fiscal 2022.Buy Crypto Now
“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,” global head of Blackstone Private Equity Joe Baratta said.
Goldman Sachs and Centerview Partners LLC are financial advisers to Emerson, while Barclays is the lead financial adviser to Blackstone.