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Emerson Electric Co EMR

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Emerson Electric’s Aspen Tech Deal Makes Strategic Sense, but Financial Rewards Are Unremarkable

Joshua Aguilar Equity Analyst

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.

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Company Profile

Business Description

Emerson Electric is a multi-industrial conglomerate that operates under two business platforms: automation solutions and commercial and residential solutions. The latter is further subdivided into two operating segments: climate technologies, which sells HVAC and refrigeration products and services, as well as tools and home products, which sells tools and compressors, among other products and services. Commercial and residential solutions boasts several household brands, including Copeland, InSinkErator, and RIDGID. Automation solutions is most known for its process manufacturing solutions, which consists of measurement instrumentation, as well as valves and actuators, among other products and services. About half of the firm’s geographic sales take place in the United States.

8000 West Florissant Avenue, P.O. Box 4100
St. Louis, MO, 63136
T +1 314 553-2000
Sector Industrials
Industry Specialty Industrial Machinery
Most Recent Earnings Jun 30, 2021
Fiscal Year End Sep 30, 2021
Stock Type Cyclical
Employees 83,500