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Emerson Electric: No Change to Our Fair Value Estimate as NI Deal Closes

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Wide-moat-rated Emerson Electric EMR completed its $8.2 billion acquisition of test and measurement equipment and services provider National Instruments NATI on Oct. 11. We don’t expect to materially change our $105 fair value estimate, since our model currently accounts for the valuation impact from the transaction. We will update our financial projections once Emerson management issues guidance on the NI transaction’s impact.

However, we remind investors that our stand-alone fair value estimate for NI was $43 per share. Emerson paid an effective price of $59.61 per share. Even with run-rate cost synergies of $165 million by year five (which doesn’t include a front-end-loaded $155 million in costs to achieve, or what we estimate is a mid-single-digit percentage of net cost synergies by year five), we think Emerson is overpaying for the acquisition. Consequently, we still model about $700 million in value destruction from the deal. However, this isn’t material to our valuation; it translates to just over $1 of negative impact to our fair value estimate.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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Joshua Aguilar

Director of Equity Research, Resources
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Joshua Aguilar is the director of resources equity research for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

Aguilar joined Morningstar in 2016 as an associate on the financials team, and he was promoted to analyst on the industrials team in 2018 and to senior analyst in 2022. He has served as associates coordinator since 2021 and led Morningstar's diversity efforts as DEI co-chair since 2020. Aguilar has been a mentor to several associates on their paths to becoming analysts. He also has hosted a Morningstar earnings town hall, participated in analyzing Morningstar stock, and been a strong contributor through both client interactions and his General Electric stock call. Aguilar co-authored an Outstanding Research Achievement-winning piece with colleague Kris Inton on CEO compensation in 2021. He also has taught Morningstar's model to new hires for many years as part of the valuation committee.

Before joining Morningstar, Aguilar was a practicing business transactional attorney in Florida. He graduated magna cum laude with a bachelor's degree in political science and criminology from the University of Florida. He also has a Master of Business Administration from Rollins College and a Juris Doctor from Wake Forest University.

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