FERGUSON – Emerson announced it is selling another portion of its business and moving its corporate headquarters from its longtime home in the St. Louis area.
Emerson plans to sell a controlling interest in its Climate Technologies business to private equity funds managed by Blackstone, a New York-based investment firm. Climate Technologies is 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 of the headquarters, which will house approximately 1,300 employees. The company would have the option to extend the lease by two years.
During that time, CFO Frank Dellaquila said during a call with investors Monday morning that the company would conduct “a comprehensive assessment of potential headquarters locations.” A company spokesman said Emerson is evaluating potential headquarters “both inside and outside the St. Louis area,” and the decision “will be made based on the best strategic interests of the company.”
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Greater St. Louis CEO Jason Hall said he spoke with Emerson President and CEO Lal Karsanbhai Monday morning and made the case for Emerson staying in the area.
“But we are competing for talent and investment in a global marketplace,” Hall said in a statement. “All of us in St. Louis urgently need to work together to proactively leverage our strengths and roll up our sleeves to address our challenges. Our future depends on it.”
Karsanbhai called Monday’s announcement a “key milestone” in the company’s efforts to become a pure-play company focused entirely on its automation brands.
In the past year, the company ditched two companies in the commercial and residential solutions space: InSinkErator, the garbage disposal brand, and Therm-O-Disc, a maker of parts and sensors for temperature control systems.
Karsanbhai led the company’s automation solutions segment before becoming chief executive in February 2021, succeeding longtime CEO David Farr.
Jeff Windau, an industry analyst at Edward Jones, said he views the sale of Climate Technologies as a win for investors. It’s a step toward higher growth and profitability, he said, although there may be greater stock price volatility with a smaller portfolio.
The Climate Technologies division manufactures HVAC and refrigeration compression products. Brands include Copeland, Vilter, Dixell, White-Rodgers and Sensi. The company had sales of $5 billion in fiscal 2022 and employs approximately 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 retain a minority interest.
Proceeds from the transaction will be used to invest in growth and acquisitions. Pressed for more details by an analyst during Monday’s conference call, Karsanbhai replied, “I know you want me to start listing the names of companies. I can’t do that.” But he added, “We’re clearly looking for sizeable opportunities in big markets.”
Emerson reported quarterly earnings on Monday. Revenue was $5.4 billion for the quarter ended 9/30, compared to $4.9 billion for the same quarter last year. Net income was $740 million compared to $670 million in the same quarter last year.
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