Emerson to divest remaining stake in Copeland for $3.5bn to streamline portfolio

Emerson (NYSE: EMR) has reached a definitive agreement to sell its 40% common equity ownership in the Copeland joint venture, formerly known as Emerson Climate Technologies, for a transaction value of approximately $3.5 billion. This sale includes pre-tax cash proceeds of $3.4 billion, net of the release of $0.1 billion in future indemnity obligations. Private equity funds managed by Blackstone will acquire the stake, marking a significant step in Emerson’s ongoing portfolio simplification efforts.

Enhancing Focus on High-Growth Automation Markets

Lal Karsanbhai, President and CEO of Emerson, emphasized the strategic importance of this transaction, stating, “This transaction is a key step to simplify our portfolio and enhance Emerson’s focus as a global leader in automation. We believe now is the right time to execute our plans to fully exit the Copeland business.” The sale to Blackstone is seen as a move to provide Emerson shareholders with certainty and simplified portfolio management while allowing the company to concentrate on its high-growth automation markets.

Joe Baratta, Global Head of Blackstone Private Equity, expressed enthusiasm about acquiring full ownership of Copeland, noting the company’s leadership in energy-efficient heating and cooling solutions and Blackstone’s commitment to supporting its continued growth.

Transaction Details and Financial Implications

The transaction, unanimously approved by Emerson’s Board of Directors, is slated to close in the second half of 2024, subject to regulatory approvals and customary closing conditions. Emerson anticipates a net pre-tax gain of approximately $0.2 billion from this sale and plans to use the $2.9 billion in after-tax cash proceeds to reduce its existing debt.

Supporting the transaction, a wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA) and GIC will invest alongside Blackstone. Davis Polk & Wardwell LLP and Goldman Sachs & Co. LLC served as legal and financial advisors to Emerson, respectively, while Joele Frank, Wilkinson Brimmer Katcher provided investor relations advice. Blackstone and Copeland received financial advisory services from Barclays, with RBC Capital Markets, LLC leading the debt financing aspect of the transaction.

This sale follows Emerson’s strategic decision in late 2022 to sell a 55% stake in its Climate Technologies business to Blackstone, valuing the business at $14 billion and netting Emerson approximately $9.5 billion in upfront, pre-tax cash proceeds. This earlier transaction aimed to transform Emerson into a more focused automation entity and enhance its capacity for strategic mergers and acquisitions within the sector.