Emerson Announces Key Actions to Complete the Portfolio Transformation to an Industrial Technology Leader Delivering Advanced Automation Solutions

PR Newswire

ST. LOUIS, Nov. 5, 2024

Proposes to Acquire Remaining Outstanding Shares of AspenTech for $240 per Share in Cash

Commences Review of Strategic Alternatives for Safety & Productivity Segment

Announces Increased Return of Capital to Shareholders with Plans to Repurchase Approximately $2.0 Billion of Shares in Fiscal 2025; Expecting $1.0 Billion in Fiscal Q1

ST. LOUIS, Nov. 5, 2024 /PRNewswire/ -- Emerson $(EMR)$ today announced three key strategic and financial actions in the final phase of its portfolio transformation to an industrial technology leader focused on automation:

   -- Emerson has made a proposal to acquire all outstanding shares of common 
      stock of AspenTech $(AZPN)$ ("AspenTech") not already owned by 
      Emerson for $240 per share in cash. The proposed transaction follows 
      Emerson's 55% majority investment in AspenTech, which was completed in 
      2022. Emerson currently owns approximately 57% of AspenTech's outstanding 
      shares of common stock. Upon completion of the transaction, AspenTech 
      would become a wholly owned subsidiary of Emerson. 
 
   -- Emerson has commenced a process to explore strategic alternatives, 
      including a cash sale, for the Safety & Productivity segment, which 
      comprises the remaining businesses not related to automation in Emerson's 
      portfolio. 
 
   -- Emerson plans to repurchase approximately $2.0 billion of its common 
      stock in fiscal year 2025, with approximately $1.0 billion of the 
      repurchase expected to be completed in the first quarter of fiscal year 
      2025. 

"Emerson has been executing against a clear value creation roadmap as we build the most differentiated global industrial technology portfolio of software-defined and hardware-advantaged automation solutions," said Lal Karsanbhai, President and Chief Executive Officer of Emerson. "The key strategic actions we are announcing today are consistent with our objective to drive value for our shareholders and complete our portfolio transformation in the most financially attractive way. Upon the successful completion of these actions, Emerson will have created a cohesive automation portfolio which strengthens our innovation leadership in the market and positions Emerson to deliver further growth, margin expansion and shareholder value creation."

Proposal to Acquire Remaining Outstanding Shares of AspenTech

Emerson's proposed $240 per share in cash to acquire all outstanding shares of AspenTech common stock not already owned represents a multiple of 29x consensus estimates for AspenTech's fiscal year 2025 Adjusted EBITDA, a multiple consistent with the forward multiple paid in its original transaction for AspenTech. Emerson's proposal represents a 35% premium to the company's undisturbed share price of $177.84 on August 6, 2024, and an 8% premium to the undisturbed 52 week high of $221.94 through August 6, 2024, the date immediately prior to Emerson's August 7, 2024 earnings call, when active transaction speculation began in the market, including in multiple published analyst reports. Since August 6, AspenTech's share price has increased 34% versus industrial software peer(1) share prices increasing 8% on average and the S&P500 increasing 9% over the same period.

The proposal implies a fully diluted market capitalization for AspenTech of $15.3 billion and an Enterprise Value of $15.1 billion.

Karsanbhai continued, "Since completing our initial investment in 2022, our partnership with AspenTech has been highly productive and advanced our capabilities in software-defined control. The strategic and operating success of our partnership with AspenTech over the last two years gives us confidence that the time is right to bring Emerson and AspenTech together. As one company, with shared priorities and investment, we will be even better positioned for growth, margin expansion and shareholder value creation."

The combination of Emerson and AspenTech would advance key initiatives, create new opportunities through full integration as a single company and further accelerate Emerson's industrial software strategy with benefits including:

   -- Accelerates Realization of Software-Defined Control: Developments over 
      the last 3 years have proven the value and feasibility of 
      software-defined control. A single integrated organization would benefit 
      Emerson as it designs seamless hardware plus software solutions for its 
      customers. 
 
   -- Enhances Alignment Between Emerson and AspenTech for Additional Synergy 
      Realization: As a single company leveraging the proven Emerson Management 
      System, there will be opportunities for immediate additional cost 
      efficiencies from the transaction. Commercially, the proposed transaction 
      drives greater alignment, collaboration and integration, to allow Emerson 
      and AspenTech to invest, innovate and cross-sell more effectively and 
      drive further sales synergies over time. 
 
   -- Strengthens Combined Automation Software Offering: As a single integrated 
      business, Emerson will have a highly differentiated automation software 
      business globally with software addressing the entire lifecycle of 
      automating complex operations, from design and engineering to production 
      and asset optimization. 

Emerson expects the impact of this proposed transaction with synergies to be neutral to Adjusted EPS in fiscal 2025.

Emerson has delivered its proposal in a letter to AspenTech's Board of Directors, filed with the SEC, and copied below. The proposal does not create any binding legal obligation between Emerson and AspenTech unless and until mutually acceptable definitive transaction documents are executed.

Emerson will not proceed with such a transaction unless a fully empowered special committee, comprising solely independent and disinterested directors appointed by AspenTech's Board of Directors and advised by independent legal and financial advisors, recommends approval of such transaction to the AspenTech Board. Emerson's proposal is that the transaction be effected by a tender offer that would be subject to a non-waivable condition that at least a majority of the AspenTech common stock held by minority stockholders be tendered and not withdrawn in accordance with the framework established under Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) and its progeny; and thereafter a merger consummated at the same price without further stockholder action.

The proposal is not subject to any financing condition and would be financed from cash on hand, committed lines of credit and/or other available sources of financing. No assurance can be given whether the proposal will lead to a transaction or as to any of the terms or conditions of such transaction. Emerson does not intend to make further announcements, beyond the conference call, regarding the proposal until such time as a definitive agreement is reached or if further disclosure is appropriate or necessary.

Exploring Strategic Alternatives for Safety & Productivity Segment

Emerson also announced today that it is exploring strategic alternatives for its Safety & Productivity segment, including a cash sale, to maximize shareholder value. The segment, which includes Emerson's legacy tools businesses, contributed $1.4 billion of sales to Emerson in fiscal year 2024, with 24.5% Adjusted Segment EBITA(2) margins.

There is no deadline or definitive timetable set for completion of the strategic alternatives process or assurance that the process will result in any transaction. Emerson does not intend to make further announcements regarding the review of strategic alternatives, beyond the conference call, unless and until the Board approves a specific transaction or otherwise determines further disclosure is appropriate or necessary.

Increasing Return of Capital to Shareholders

Emerson also announced today that it plans to repurchase approximately $2.0 billion of its common stock in fiscal year 2025 increasing its total capital returned to shareholders to approximately 100 percent of the guided free cash flow. Emerson expects to complete approximately $1.0 billion of the repurchase by the end of the first fiscal quarter.

The announced repurchase underscores Emerson's commitment to driving shareholder returns and confidence in the company's strong outlook, significant free cash generation and benefits of the actions announced today. Assuming successful completion of the transactions, Emerson expects total net leverage to be less than 2x by the end of fiscal year 2025 and expects to maintain its A2/A credit rating.

Emerson Fourth Quarter and Full Year 2024 Results

In a separate press release this morning, Emerson announced financial results for its fourth quarter and fiscal year 2024, ended September 30, 2024, and provided guidance for its fiscal 2025 year.

As previously announced, beginning at 7:00 a.m. Central Time / 8:00 a.m. Eastern Time today, Emerson management will discuss fourth quarter and fiscal year 2024 results, as well as the strategic actions announced today, during an investor conference call. Participants can access a live webcast available at www.emerson.com/investors at the time of the call. A replay of the call will be available for 90 days. Conference call slides will be posted in advance of the call on the company website.

Advisors

Goldman Sachs & Co. LLC and Centerview Partners LLC are serving as financial advisors to Emerson, and Davis Polk & Wardwell LLP is serving as legal advisor.

About Emerson

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