Blackstone Inc. agreed to buy control of Emerson Electric Co.’s climate technologies arm in a deal valuing the business at about $14 billion.
(Bloomberg) — Blackstone Inc. agreed to buy control of Emerson Electric Co.’s climate technologies arm in a deal valuing the business at about $14 billion.
The private equity firm will acquire a majority stake in the unit, which sells the Copeland line of compressors used in heating and cooling equipment, according to a statement Monday. St. Louis-based Emerson will receive upfront pretax cash proceeds of around $9.5 billion and keep a 45% stake.
The business, which also includes Emerson’s portfolio of products and services related to heating, ventilation, air conditioning and refrigeration, represents around $5 billion of net sales in its 2022 financial year. Bloomberg News reported in early October that Blackstone was in talks to buy assets from Emerson’s commercial and residential solutions division.
Emerson plans to use the proceeds for “strategic M&A to strengthen and diversify its automation portfolio in four targeted adjacent markets,” the company said, adding that it expects to return cash to shareholders via its dividend and around $2 billion in share buybacks next year.
Shares of Emerson have fallen about 6% in New York trading this year, giving the company a market value of nearly $52 billion. The transaction marks a sizable private equity deal in an increasingly difficult environment. Tightening credit markets and slowing economic growth are keeping many buyout firms on the sidelines.
Rising Sales
Emerson also reported adjusted earnings per share for the fiscal fourth quarter that beat the average analyst estimate on rising net sales. The company said it expects adjusted earnings per share of as much as $4.15 for 2023 and net sales growth of as much as 9%.
The Abu Dhabi Investment Authority and Singapore sovereign wealth fund GIC Pte are investing in Emerson’s climate technologies business alongside Blackstone, according to the statement.
The deal comes following a pandemic boom in the US housing market, which saw home prices and home-improvement activity soar. The market has begun cooling in recent months amid rising interest rates and recession fears.
Emerson has been reshuffling its business mix through divestitures after merging its industrial software business earlier this year with Aspen Technology Inc. In August, it agreed to sell its garbage-disposal arm to Whirlpool Corp. for $3 billion.
–With assistance from Kamaron Leach, Dinesh Nair and Kit Rees.
(Updates with Emerson’s earnings results in the sixth paragraph)
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