Emerson Electric Co. agreed to acquire measurement systems maker National Instruments Corp. in a deal valued at $8.2 billion following a long pursuit.
(Bloomberg) — Emerson Electric Co. agreed to acquire measurement systems maker National Instruments Corp. in a deal valued at $8.2 billion following a long pursuit.
St. Louis-based Emerson will buy National Instruments for $60 per share in cash, according to a statement Wednesday, which confirmed an earlier Bloomberg News report. The price represents a 49% premium to National Instruments’ closing price on Jan. 12, the day before the company announced a strategic review.
Emerson beat out smaller rival Fortive Corp. in a competitive process for National Instruments, people with knowledge of the matter said earlier. Shares of Emerson fell 1.7% at 11:37 a.m. Wednesday in New York, while National Instruments jumped 9.6% to $57.61.
The back-and-forth over Austin, Texas-based National Instruments, which provides hardware and software for engineers and scientists, has gone on for almost a year. Emerson said in January that it had made more than one offer to buy the company since May 2022, but National Instruments separately said at the time that it wanted to talk to other potential buyers before making a decision.
In a Feb. 8 conference call with analysts, Emerson Chief Executive Officer Lal Karsanbhai said he wouldn’t pay $60 a share for National Instruments.
The deal’s price is 20% above the valuations of National Instruments’ main peers and is “pricier than we expected,” said Karen Ubelhart, an analyst with Bloomberg Intelligence.
“The deal would modestly aid adjusted EPS in the first year, in line with our view, with a forecast for $165 million in synergies in five years,” Ubelhart said in a note.
Karsanbhai defended the acquisition price, saying Emerson remained true to its financial objective after eight weeks of due diligence that gave his company access to non-public information, facilities and senior management. There was a competing bid at $60 and Emerson got the nod because of certainty it could close the deal, Karsanbhai said in a telephone interview.
“What we learned made us like the asset more than in terms of the value creation potential of the company,” he said.
Automation Drive
Karsanbhai has been very active since taking over from longtime CEO David Farr in early 2021 to shake up Emerson’s collection of businesses to become a pure-play automation company with a software underpinning. He acquired AspenTech, Fluxa and other companies for $9 billion while selling iconic businesses that were more tied to consumer markets, including a garbage disposal unit and an air-conditioner compressor company, for $18 billion.
In November, Karsanbhai laid out a strategy that included pursuing a new business segment: test and measurement. The acquisition of National Instruments gives Emerson a big head start on building out that market segment. With that segment along with industrial software, factory automation and smart-grid solutions, Emerson has a $100 billion addressable market with operating margins that average 20% or more.
Emerson doesn’t plan to do any large acquisitions or divestitures after the flurry of activity, Karsanbhai said, although small, “bolt-on” deals could happen.
“Now we’ve got to put our heads down and we have to deliver on what we’ve committed to our shareholders,” he said.
In one of Emerson’s public letters, Karsanbhai said that buying National Instruments — which operates in 40 countries serving customers in the semiconductor, electronics, transport and defense sectors — would help it generate better growth and a higher-margin portfolio.
Read More: National Instruments Co-Founder Backs $7 Billion Emerson Offer
The deal will boost the combined Emerson portfolio’s gross margins and will be immediately accretive to its adjusted earnings per share and long-term targets, according to Wednesday’s statement. Emerson expects $165 million of cost savings from the deal by the end of the fifth year.
Emerson plans to finance the purchase using available cash, including proceeds from the pending sale of a majority stake in its Climate Technologies business to Blackstone Inc., it said in the statement. The companies expect the deal to close in the first half of Emerson’s 2024 financial year, subject to regulatory clearance and approval by National Instruments shareholders.
Goldman Sachs Group Inc. and Centerview Partners advised Emerson on the deal, while National Instruments worked with Bank of America Corp.
(Updates with CEO comments beginning in the eighth paragraph)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.