Blackstone and Emerson Electric agree $14bn deal

February 2023 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

February 2023 Issue

To help it power the next phase of growth for climate technologies, global technology and software company Emerson is to sell a majority stake in its Climate Technologies business to private equity (PE) funds managed by Blackstone Inc. in a transaction valued at $14bn.

Under the terms of the definitive agreement, Emerson will receive upfront, pre-tax cash proceeds of approximately $9.5bn while retaining a non-controlling ownership interest in a new standalone joint venture.

Emerson will also receive a note of $2.25bn at close and retain 45 percent 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 initial public offering (IPO).

The standalone climate technologies business includes the market-leading Copeland compressor business and the entire portfolio of products and services across all heating, ventilation and air conditioning (HVAC) and refrigeration end-markets, representing approximately $5bn of sales in 2022.

“This is a definitive step in the portfolio journey we embarked on when I became chief executive in early 2021,” said Lal Karsanbhai, president and chief executive 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.

“Our journey has been with clear purpose – to drive growth and significant value creation for our shareholders by creating a leading global automation company,” continued Mr Karsanbhai. “Our differentiated capabilities in intelligent devices and software, and the focus, cohesiveness and operating agility of a pure-play company, will allow Emerson to bring our comprehensive automation products and solutions to a diverse set of end markets.”

Providing innovative solutions for the world’s most essential industries, Emerson is an automation leader that helps process, hybrid and discrete manufacturers optimise operations, protect personnel, reduce emissions and achieve their sustainability goals through its unmatched automation portfolio, including its majority stake in AspenTech.

“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 PE business and a testament to our ability to deliver solutions to our partners even in difficult economic and market environments.”

The transaction has been unanimously approved by Emerson’s board of directors and is expected to close in the first half of 2023, subject to regulatory approvals and customary closing conditions.

Serving as financial advisers to Emerson are Centerview Partners LLC and Goldman Sachs & Co. LLC, with Davis Polk & Wardwell LLP serving as legal counsel. Barclays is serving as lead financial adviser to Blackstone. Guggenheim Securities, LLC and Evercore are also providing financial advisory services to Blackstone.

“We are excited to partner with Blackstone given its successful history of value creation in collaboration with corporate partners,” concluded Mr Karsanbhai.”We look forward to working closely to ensure a smooth transition for Climate Technologies’ employees and customers.”

Fraser Tennant