Diversified technology company Emerson Electric Co. (EMR) recently inked a deal with Platinum Equity to sell 51% stake in its embedded computing and power business. This all-cash deal is valued at approximately $300 million and Emerson plans to retain 49% non-controlling stake in the business. The transaction aims at boosting shareholders’ wealth and is expected to close in a span of three to six months after gaining regulatory approvals.
Platinum Equity is a global leader specializing in the merging, acquisition and operation of companies and has completed more than 150 acquisitions. It serves a wide range of business markets including information technology, telecommunications, logistics, metals services, manufacturing and distribution.
According to the agreement, the embedded computing and power business will continue to operate as an independent company after the divesture. Once the transaction is complete, Emerson intends to use the equity method of accounting to report sales and earnings generated from the separate entity. However, sales and earnings figures from the embedded computing and power business will be reported in Emerson’s upcoming fiscal 2013 results.
Based in California, Emerson’s embedded computing and power business is a major provider in the design and supply of technologies used in communication as well as computing equipment and other applications. The business generated revenues of $1.4 million in fiscal 2012.
However, Emerson believes that this technology leader no longer strategically fits in its portfolio. The company cited weaker demand from the technology equipment and mobile device markets as one of primary reasons for the divesture. Through this divestment, Emerson plans to focus more on its core business. Emerson believes that Platinum Equity has the required skills and expertise to give the business a competitive edge.
Moving forward, Emerson will continue to benefit from Platinum’s strategies to position the embedded computing and power business as a strong and innovative competitor in the marketplace.
Emerson currently carries a Zacks Rank #3 (Hold). Other companies that are worth considering at present include Alamo Group, Inc. (ALG), CECO Environmental Corp. (CECE) and Calgon Carbon Corporation (CCC). While Alamo and CECO carry a Zacks Rank #1 (Strong Buy), Calgon has a Zacks Rank #2 (Buy).
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