Emerson announced a definitive agreement under which it will sell a majority stake in its Climate Technologies1 business to private equity funds managed by Blackstone in a transaction valuing Climate Technologies at $14.0 billion.
Article continues below
Emerson will receive upfront, pre-tax cash proceeds of approximately $9.5 billion while retaining a non-controlling ownership interest in a new standalone joint venture.
The standalone Climate Technologies business includes the market-leading Copeland compressor business and the entire portfolio of products and services across all HVAC and refrigeration end-markets, representing approximately $5.0 billion of fiscal 2022 sales.
Climate Technologies had fiscal 2022 net sales of $5.0 billion, pre-tax earnings of $1.0 billion and EBITDA2, including standalone costs, of $1.1 billion.
The transaction values Climate Technologies at $14.0 billion, representing a multiple of 12.7x fiscal 2022 EBITDA2, including standalone costs.
Emerson will receive upfront, pre-tax cash proceeds of approximately $9.5 billion and a note of $2.25 billion at close and retain 45% 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 IPO.
The cash consideration will be funded by $5.5 billion of fully committed debt financing ($6.2 billion inclusive of an unfunded ABL facility) and $4.4 billion of equity contribution from Blackstone.
A wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA) and GIC will invest alongside Blackstone as part of the transaction.
Emerson expects to invest the proceeds from the transaction in strategic M&A to strengthen and diversify its automation portfolio in four targeted adjacent markets, which will be discussed at Emerson’s investor conference on November 29, 2022.
Emerson also expects to continue to return cash to shareholders through share repurchases, expected to be approximately $2 billion in 2023, and its dividend.
The transaction has been unanimously approved by Emerson’s Board of Directors and is expected to close in the first half of the calendar year 2023, subject to regulatory approvals and customary closing conditions. ■