Emerson announced a definitive agreement under which it will sell a majority stake in its Climate Technologies business to private equity funds managed by Blackstone in a transaction valuing Climate Technologies at US$14 billion. The standalone Climate Technologies business includes the Copeland compressor business and the entire portfolio of products and services across all HVAC and refrigeration end markets, representing approximately US$5 billion in fiscal 2022 sales.
“Today’s announcement is a definitive step in the portfolio journey we embarked on when I became CEO in early 2021,” said Lal Karsanbhai, president and chief executive officer of Emerson. “Over the past 18 months, the Emerson team has accelerated our portfolio transformation, divesting non-core businesses including InSinkErator and Therm-O-Disc, while investing in organic growth opportunities and important transactions including AspenTech.”
Climate Technologies had fiscal 2022 net sales of US$5 billion, pre-tax earnings of US$1 billion, and earnings before interest, taxes, depreciation, and amortization including standalone costs of US$1.1 billion. The transaction values Climate Technologies at US$14 billion, representing a multiple of 12.7x fiscal 2022 EBITDA, 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 initial public offering. The cash consideration will be funded by US$5.5 billion of fully committed debt financing (US$6.2 billion inclusive of an unfunded ABL facility) and US$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.
“This transaction enables Emerson to partially monetize our Climate Technologies business at an attractive valuation and provides significant upfront cash proceeds to invest in growth, while at the same time enabling Emerson to participate in Climate Technologies’ upside potential upon exit of our non-controlling position,” said Karsanbhai. “We are excited to partner with Blackstone given its successful history of value creation in collaboration with corporate partners. We look forward to working closely with Blackstone to ensure a smooth transition for Climate Technologies’ employees and customers.”
“Copeland supplies critical components for residential, commercial, and refrigeration climate control systems. The business is poised for accelerated growth as it helps consumers and businesses shift to more energy-efficient heating and cooling products as part of their carbon reduction efforts. We are thrilled to back the business’ dedicated team as they continue to innovate and deliver energy-efficient solutions to their customers,” said Joe Baratta, global head of Blackstone Private Equity.
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.
