|Bid||0.00 x 1000|
|Ask||0.00 x 800|
|Day's Range||67.70 - 68.47|
|52 Week Range||55.39 - 74.26|
|Beta (3Y Monthly)||1.48|
|PE Ratio (TTM)||19.32|
|Earnings Date||Nov 5, 2019|
|Forward Dividend & Yield||1.96 (2.91%)|
|1y Target Est||70.94|
Emerson is D.E. Shaw's newest target as the hedge fund continues to grow its stature as an activist investor.
Many S&P 500 companies still use private jets—eschewing commercial travel for top executives—but finding out which ones do so is surprisingly hard.
A big split, corporate jets and a fiery rhetoric highlight hedge fund investor D.E. Shaw & Co.'s letter Tuesday to Ferguson-based Emerson Electric in which it's pushing for seismic changes that include dividing the company in two.
Hedge fund D.E. Shaw on Tuesday increased the pressure on Emerson Electric Co by publicly urging a breakup of the U.S. industrial conglomerate, a move it says could unlock more than $20 billion worth of shareholder value. The New York-based hedge fund, which owns a more than 1% stake in the Ferguson, Missouri-based company, wants it to split into a pure play industrial automation business and a climate technology-focused firm, D.E. Shaw wrote to the board. The hedge fund expressed concern that only one Emerson director out of 10 has bought stock with his own money in the last years, which could suggest that board members are not appropriately invested in the company's performance, a person familiar with D.E. Shaw's thinking said.
(Bloomberg Opinion) -- The activist investors are on the tarmac at Emerson Electric Co.D.E. Shaw Group on Tuesday released a letter calling for the $42 billion industrial company to spin off its climate division and make productivity and corporate-governance improvements, including culling its fleet of eight corporate jets and a helicopter. The public pressure follows reports late last month that D.E. Shaw was seeking a breakup of the company and Emerson’s subsequent announcement that it would review its operations.In its letter, D.E. Shaw takes issue with the lack of tangible commitments and deadlines for Emerson’s strategic review and stresses that some of its recommendations – such as making all board directors subject to annual elections – shouldn’t require that much deliberation in this day and age.D.E. Shaw is justified in its wariness of Emerson kicking the can down the road. CEO David Farr has been in his role for 19 years and, according to analysts, he’s signaled he will retire in fiscal 2021 or 2022 and would prefer to leave any decision on a breakup to his successor. RBC analyst Deane Dray speculated earlier this month that a preliminary update on the outcome of Emerson’s strategic review may not come until the company’s annual analyst meeting in February. Emerson is 129 years old and on track to generate $18.5 billion in revenue this year; change doesn’t happen quickly at companies like that. But in a way, that reinforces the activist investor’s argument.Emerson needs to reckon with its remaining vestiges of crusty corporate habits and old-school sprawl. Examples include the high personal usage by the CEO of that corporate jet fleet (which is managed by 40-plus employees and an intern, apparently), guaranteed three-year and staggered terms for board directors, and a jaw-dropping 18 separate office and factory buildings in the Houston area. Let's hope none of those corporate jets fly empty behind Farr’s plane, in the vein of the reported practices of former General Electric Co. CEO Jeff Immelt.Calling attention to those practices is a smart tactic that will resonate with fellow shareholders irked by Emerson’s lackluster returns, and should ramp up pressure on management to make changes more quickly. I would add to D.E. Shaw’s list of grievances a bias toward less transparency: Emerson is the only major industrial company I cover that declines to routinely webcast its presentations at major conferences.The biggest change advocated by D.E. Shaw is a breakup of Emerson. It’s an idea that’s long been bandied about because the Emerson division that sells air-conditioner controls and food-disposal systems has little to do with the unit purveying automation equipment. The company has slimmed down already, divesting about $6 billion of revenue, including the network power business it cobbled together through billions of dollars worth of disappointing acquisitions. Analysts aren’t convinced that a bigger split would pay off in the stock price.Emerson should be valued at about $73 a share based on the sum of its parts, according to the average of three analysts’ estimates. That’s just 3% higher than where Wall Street on average expected Emerson’s stock to rise over the next year before reports of D.E. Shaw’s involvement. The hedge fund, for its part, estimates Emerson could be valued at $77 if its parts were valued comparably to the average of its peers, a meaningful improvement but not a knock-your-socks-off game-changer. The real value comes through the combination of a breakup with the cost-cutting initiatives. In that scenario, D.E. Shaw sees the potential for Emerson’s valuation to rise to $101 a share. Analysts have long recognized that typical sum-of-the-parts estimates tend to underestimate the efficiency gains that come from more focused management teams, so there may be something to this kind of analysis. The prospect of a deepening downturn in the industrial sector should add to the sense of urgency for the cost-cutting opportunities D.E. Shaw has identified. Emerson in August warned that $350 million of projects planned for 2019 had been pushed to next year, while $450 million of 2020 projects had been delayed to 2021. Analysts are bracing for those numbers to get worse when the company reports its fiscal-fourth-quarter results in November, and for its 2021 earnings goals to slip out of reach. D.E. Shaw estimates Emerson can cut more than $1 billion of costs by streamlining corporate functions and improving margins in its automation division. In response to the activist investor’s letter, Farr pointed out that Emerson was “one of the first industrial companies to address the concerning trends in the macroeconomic environment.” That’s true to an extent, but its own plan calls for $100 million in restructuring spending this year, less drastic than what D.E. Shaw is proposing.I remain concerned that the industrial breakup craze is going too far and we don’t properly understand the longer-term implications of it. But the corporate-governance and cost-management shortcomings highlighted by D.E. Shaw will make it harder for Emerson’s management team to resist it.To contact the author of this story: Brooke Sutherland at firstname.lastname@example.orgTo contact the editor responsible for this story: Beth Williams at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
The New York-based hedge fund, which owns a more than 1% stake in the Ferguson, Missouri-based company, wants it to split into a pure play industrial automation business and a climate technology-focused firm, D.E. Shaw wrote to the board. The hedge fund expressed concern that only one Emerson director out of 10 has bought stock with his own money in the last years, which could suggest that board members are not appropriately invested in the company's performance, a person familiar with D.E. Shaw's thinking said. The hedge fund also wants Emerson to change how it pays management.
Emerson has a strong track record of operational excellence and actions to enhance shareholder value. Since completing its repositioning in 2016, Emerson has grown both of its platforms at above market growth rates, increased its consolidated revenue at an 8% compounded annual growth rate, generated operating cash flow of more than $8 billion, and three-year TSR of 47%. Over the last five years, Emerson has divested over $6 billion in annual revenue, including Network Power, Control Techniques, and Leroy Somer.
Hedge fund DE Shaw is calling for US automation and building equipment group Emerson Electric to split into two separate companies, reduce its spending by more than $1bn a year and improve its corporate governance structure. The company’s management and board “have let shareholders down” through “persistent undermanagement of [Emerson’s] assets and a long track record of poor capital allocation, excessive costs, suboptimal business configuration, deficient corporate governance, and misalignment of interests,” DE Shaw managing directors Edwin Jager and Michael O’Mary said in a letter to Emerson’s board of directors on Tuesday. The fund wants Emerson to separate into an industrial automation business and a climate technology-focused business to create two “leaner, more focused organisations” and end the company’s conglomerate structure, they added.
In his second "Executive Decision" segment of Tuesday night's Mad Money program, Jim Cramer sat down with David Farr, chairman and CEO of Emerson Electric Co. , the industrial conglomerate that just received the attention of an activist investor. Farr started off by saying that the Emerson's business continues to perform well, with 5.5% sales growth for 2019. Farr said those plans are already underway as Emerson is cutting costs and firming up its balance sheet so it will be positioned to grow when the global economy rebounds.
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The move follows news that hedge fund D.E. Shaw & Co is building a stake in Emerson and could push for changes, including a potential split up of the company.
Multiple news outlets said Friday an activist investor had taken a stake in Emerson Electric. Tuesday morning, the company said it was undergoing a strategic review of its operations.
Emerson (EMR) today announced that it is conducting a comprehensive review of the Company’s operational, capital allocation and portfolio initiatives to enhance shareholder value and position the Company for both near- and long-term success. Emerson’s Board will lead the evaluation, which will be supported by a leading consulting firm and independent legal and financial advisors. “Following discussions with our Board and management team over the course of this year, we have concluded that a thorough review of our cost structure, capital allocation, and portfolio will inform decisions that drive strong value creation for our shareholders in what we expect to be an uncertain environment,” said Chairman and Chief Executive Officer David N. Farr.
Emerson Electric is embarking on a review of its 'operational, capital allocation and portfolio initiatives' - confirmation the company is exploring a potential breakup and sale as a way to boost shareholder value.
Emerson Electric could be headed for a profitable breakup, according to an RBC analyst, who says activist investors are circling the industrial giant.
(Bloomberg) -- Hedge fund D.E. Shaw has built a stake in Emerson Electric Co. and plans to push for a breakup of the automation-equipment maker, according to people familiar with the matter.The New York-based firm also may push for the company to consider taking on additional debt to fund a buyback of around $7 billion of its shares, said the people, who asked to not be identified because the matter isn’t public.D.E. Shaw believes the company should split its business into two units: Automation solutions business and commercial and residential solutions business, the people said. The firm also believes there would be buyers for both businesses, they said.Emerson Electric rose as much as 4% on the news before closing up 3.4% to $66.40 in New York trading, for a market value of $40.8 billion. The shares have fallen about 14% in the past year.Representatives for D.E. Shaw and Emerson Electric declined to comment.The automation solutions division offers software and services that help energy, refining, chemicals and other types of companies maximize production and lower costs, according to Emerson Electric’s most recent annual report. The commercial and residential solutions business makes heating and air conditioning products, among other things.D.E. Shaw has previously pushed for changes at oil and gas company EQT Corp., commodities firm Bunge Ltd., and retailer Lowe’s Cos. Inc.Based in St. Louis, Emerson Electric designs and manufactures electronic equipment for industrial, commercial and consumer markets around the world.(Updates share price in fourth paragraph. An earlier version of this report was corrected to remove line about Emerson Electric being D.E. Shaw’s first activist position since Quentin Koffey left the firm in May.)\--With assistance from Thomas Black.To contact the reporter on this story: Scott Deveau in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Liana Baker at email@example.com, Matthew Monks, Brendan CaseFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Stock in the industrial conglomerate (EMR) is moving after reports that the hedge fund D.E. Shaw has taken a stake in the company and is pushing for change. Details are thin, but this looks like another situation where an activist tries to unlock value by breaking a large company into smaller pieces. Neither Emerson nor Shaw immediately responded to a request for comment.
Emerson, which pursued an unsuccessful $29 billion acquisition bid for peer Rockwell Automation Inc two years ago, has long been seen as a potential break-up candidate among investors and analysts. D.E. Shaw is in the process of building a position in Emerson as it prepares to pressure the company to pursue a split and other changes, the sources said. D.E. Shaw and Emerson declined to comment.