Emerson sells part of business, says he would consider leaving St. Louis

Emerson announced plans to sell a majority stake in its Climate Technologies business to private equity funds managed by Blackstone, a New York-based investment firm. Climate Technologies will be structured as a joint venture between Emerson and Blackstone.

As part of the transaction, Emerson will sell ownership of its Ferguson campus to the new joint venture and enter into a three-year lease on the headquarters, where approximately 1,300 employees work. The company would have the option of extending the lease for two years.

Meanwhile, Chief Financial Officer Frank Dellaquila said in a call with investors Monday morning that the company will undertake “a comprehensive evaluation of potential headquarters locations.” A company spokesperson said Emerson is evaluating potential headquarters “inside and outside of the St. Louis area” and that the decision “will be made based on the company’s best strategic interests.” society”.

Jason Hall, CEO of Greater St. Louis, said he spoke Monday morning with Emerson Chairman and CEO Lal Karsanbhai and advocated for Emerson to stay in the area.

“But we are competing in a global market for talent and investment,” Hall said in a statement. “All of us in St. Louis must urgently work together to proactively capitalize on our strengths and roll up our sleeves to meet our challenges. Our future depends on it.”

Karsanbhai called Monday’s announcement a “critical step” in the company’s efforts to become a pure-play company focused entirely on its automation brands.

In the past year, the company has jettisoned two companies on the commercial and residential solutions side: InSinkErator, the waste disposal brand, and Therm-O-Disc, a maker of parts and sensors for control systems. of the temperature.

Karsanbhai led the company’s automation solutions segment before becoming chief executive in February 2021, succeeding longtime CEO David Farr.

Jeff Windau, industry analyst at Edward Jones, said he viewed the sale of Climate Technologies as a win for investors. It’s a move towards higher growth and profitability, he said, although with a narrower portfolio there can be more volatility in the stock price.

The Climate Technologies business manufactures HVAC compression and refrigeration products. Its brands include Copeland, Vilter, Dixell, White-Rodgers and Sensi. It brought in $5 billion in revenue in fiscal year 2022 and employs about 18,000 people.

The deal values ​​Climate Technologies at $14 billion. The sale is expected to close in the first half of 2023. Emerson will receive cash proceeds of $9.5 billion and will retain a non-controlling interest.

Proceeds from the transaction will be used to invest in growth and acquisition. Pressed by an analyst for more details during Monday’s conference call, Karsanbhai replied, “I know you want me to start listing company names. I can’t do that.” But, he added, “we are clearly looking for significant opportunities in the big markets.”

Emerson announced its quarterly results on Monday. Revenue was $5.4 billion for the quarter that ended Sept. 30, compared to $4.9 billion in the same quarter last year. Net income was $740 million, up from $670 million in the same quarter last year.