Analyst Note| Joshua Aguilar |
Wide-moat Emerson Electric confirmed it is acquiring a 55% interest in wide-moat Aspen Technologies in a total transaction valued at $11 billion prior to any synergies, or $13.40 billion after the inclusion of deal synergies. As part of the deal, Emerson is contributing $6 billion in cash, and $2.50 billion in assets. While we think the deal makes strategic sense for both firms, we believe the financial benefits mostly accrue to Aspen Technologies’ shareholders. Emerson is acquiring the stock of Aspen at an implied $160 per share relative to our predeal fair value estimate of $151 per share, prior to any synergies. After giving full credit for synergies, including $2.40 billion for New Aspen Tech Synergies (of which 55% accrue to Emerson) and $600 million in Emerson-related synergies (of which 100% accrue to Emerson), we model a negligible amount of dilution (between $100 million and $200 million). We raise our fair value estimate to $102 from $101 per share. However, since we see the deal as essentially value-neutral, the raise is entirely due to time value of money.