10.31.22
Emerson announced a definitive agreement under which it will sell a majority stake in its Climate Technologies business to private equity funds managed by 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.
The standalone Climate Technologies business includes the Copeland compressor business and the entire portfolio of products and services across all HVAC and refrigeration end-markets, representing approximately $5 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.
“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 CEO 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.
“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 Karsanbhai. “We are excited to partner with Blackstone given its successful history of value creation in collaboration with corporate partners.”
“Blackstone has a long and successful track record of large-scale corporate partnerships, a key pillar of our investment strategy,” said Joe Baratta, global head of Blackstone Private Equity. “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."
Climate Technologies had fiscal 2022 net sales of $5 billion and pre-tax earnings of $1.0 billion. The transaction values Climate Technologies at $14 billion, representing a multiple of 12.7x fiscal 2022 EBITDA, 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.
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. Emerson also expects to continue to return cash to shareholders through share repurchases, expected to be approximately $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 the calendar year 2023, subject to regulatory approvals and customary closing conditions.
The standalone Climate Technologies business includes the Copeland compressor business and the entire portfolio of products and services across all HVAC and refrigeration end-markets, representing approximately $5 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.
“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 CEO 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.
“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 Karsanbhai. “We are excited to partner with Blackstone given its successful history of value creation in collaboration with corporate partners.”
“Blackstone has a long and successful track record of large-scale corporate partnerships, a key pillar of our investment strategy,” said Joe Baratta, global head of Blackstone Private Equity. “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."
Climate Technologies had fiscal 2022 net sales of $5 billion and pre-tax earnings of $1.0 billion. The transaction values Climate Technologies at $14 billion, representing a multiple of 12.7x fiscal 2022 EBITDA, 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.
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. Emerson also expects to continue to return cash to shareholders through share repurchases, expected to be approximately $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 the calendar year 2023, subject to regulatory approvals and customary closing conditions.
