Proposes to Acquire Remaining Outstanding
Shares of AspenTech for $240 per
Share in Cash
Commences Review of Strategic Alternatives for
Safety & Productivity Segment
Announces Increased Return of Capital to
Shareholders with Plans to Repurchase Approximately $2.0 Billion of Shares in Fiscal 2025; Expecting
$1.0 Billion in Fiscal Q1
ST.
LOUIS, Nov. 5, 2024 /PRNewswire/ -- Emerson
(NYSE: EMR) today announced three key strategic and financial
actions in the final phase of its portfolio transformation to an
industrial technology leader focused on automation:
- Emerson has made a proposal to acquire all outstanding shares
of common stock of AspenTech (NASDAQ: AZPN) ("AspenTech") not
already owned by Emerson for $240 per
share in cash. The proposed transaction follows Emerson's 55%
majority investment in AspenTech, which was completed in 2022.
Emerson currently owns approximately 57% of AspenTech's outstanding
shares of common stock. Upon completion of the transaction,
AspenTech would become a wholly owned subsidiary of Emerson.
- Emerson has commenced a process to explore strategic
alternatives, including a cash sale, for the Safety &
Productivity segment, which comprises the remaining businesses not
related to automation in Emerson's portfolio.
- Emerson plans to repurchase approximately $2.0 billion of its common stock in fiscal year
2025, with approximately $1.0 billion
of the repurchase expected to be completed in the first quarter of
fiscal year 2025.
"Emerson has been executing against a clear value creation
roadmap as we build the most differentiated global industrial
technology portfolio of software-defined and hardware-advantaged
automation solutions," said Lal Karsanbhai, President and Chief
Executive Officer of Emerson. "The key strategic actions we are
announcing today are consistent with our objective to drive value
for our shareholders and complete our portfolio transformation in
the most financially attractive way. Upon the successful completion
of these actions, Emerson will have created a cohesive automation
portfolio which strengthens our innovation leadership in the market
and positions Emerson to deliver further growth, margin expansion
and shareholder value creation."
Proposal to Acquire Remaining Outstanding Shares of
AspenTech
Emerson's proposed $240 per share
in cash to acquire all outstanding shares of AspenTech common stock
not already owned represents a multiple of 29x consensus estimates
for AspenTech's fiscal year 2025 Adjusted EBITDA, a multiple
consistent with the forward multiple paid in its original
transaction for AspenTech. Emerson's proposal represents a 35%
premium to the company's undisturbed share price of $177.84 on August 6,
2024, and an 8% premium to the undisturbed 52 week high of
$221.94 through August 6, 2024, the date immediately prior to
Emerson's August 7, 2024 earnings
call, when active transaction speculation began in the market,
including in multiple published analyst reports. Since August 6, AspenTech's share price has increased
34% versus industrial software
peer1 share prices increasing 8% on
average and the S&P500 increasing 9% over the same period.
The proposal implies a fully diluted market capitalization for
AspenTech of $15.3 billion and an
Enterprise Value of $15.1
billion.
Karsanbhai continued, "Since completing our initial investment
in 2022, our partnership with AspenTech has been highly productive
and advanced our capabilities in software-defined control. The
strategic and operating success of our partnership with AspenTech
over the last two years gives us confidence that the time is right
to bring Emerson and AspenTech together. As one company, with
shared priorities and investment, we will be even better positioned
for growth, margin expansion and shareholder value creation."
The combination of Emerson and AspenTech would advance key
initiatives, create new opportunities through full integration as a
single company and further accelerate Emerson's industrial software
strategy with benefits including:
- Accelerates Realization of Software-Defined Control:
Developments over the last 3 years have proven the value and
feasibility of software-defined control. A single integrated
organization would benefit Emerson as it designs seamless hardware
plus software solutions for its customers.
- Enhances Alignment Between Emerson and AspenTech for
Additional Synergy Realization: As a single company leveraging
the proven Emerson Management System, there will be opportunities
for immediate additional cost efficiencies from the transaction.
Commercially, the proposed transaction drives greater alignment,
collaboration and integration, to allow Emerson and AspenTech to
invest, innovate and cross-sell more effectively and drive further
sales synergies over time.
- Strengthens Combined Automation Software
Offering: As a single integrated business, Emerson will
have a highly differentiated automation software business globally
with software addressing the entire lifecycle of automating
complex operations, from design and engineering to production and
asset optimization.
Emerson expects the impact of this proposed transaction with
synergies to be neutral to Adjusted EPS in fiscal 2025.
Emerson has delivered its proposal in a letter to AspenTech's
Board of Directors, filed with the SEC, and copied below. The
proposal does not create any binding legal obligation between
Emerson and AspenTech unless and until mutually acceptable
definitive transaction documents are executed.
Emerson will not proceed with such a transaction unless a fully
empowered special committee, comprising solely independent and
disinterested directors appointed by AspenTech's Board of Directors
and advised by independent legal and financial advisors, recommends
approval of such transaction to the AspenTech Board. Emerson's
proposal is that the transaction be effected by a tender offer that
would be subject to a non-waivable condition that at least a
majority of the AspenTech common stock held by minority
stockholders be tendered and not withdrawn in accordance with the
framework established under Kahn v. M&F Worldwide Corp.,
88 A.3d 635 (Del. 2014) and its progeny; and thereafter a
merger consummated at the same price without further stockholder
action.
The proposal is not subject to any financing condition and would
be financed from cash on hand, committed lines of credit and/or
other available sources of financing. No assurance can be given
whether the proposal will lead to a transaction or as to any of the
terms or conditions of such transaction. Emerson does not intend to
make further announcements, beyond the conference call, regarding
the proposal until such time as a definitive agreement is reached
or if further disclosure is appropriate or necessary.
Exploring Strategic Alternatives for Safety &
Productivity Segment
Emerson also announced today that it is exploring strategic
alternatives for its Safety & Productivity segment, including a
cash sale, to maximize shareholder value. The segment, which
includes Emerson's legacy tools businesses, contributed
$1.4 billion of sales to Emerson in
fiscal year 2024, with 24.5% Adjusted Segment
EBITA2 margins.
There is no deadline or definitive timetable set for completion
of the strategic alternatives process or assurance that the process
will result in any transaction. Emerson does not intend to make
further announcements regarding the review of strategic
alternatives, beyond the conference call, unless and until the
Board approves a specific transaction or otherwise determines
further disclosure is appropriate or necessary.
Increasing Return of Capital to Shareholders
Emerson also announced today that it plans to repurchase
approximately $2.0 billion of its
common stock in fiscal year 2025 increasing its total capital
returned to shareholders to approximately 100 percent of the guided
free cash flow. Emerson expects to complete approximately
$1.0 billion of the repurchase by the
end of the first fiscal quarter.
The announced repurchase underscores Emerson's commitment to
driving shareholder returns and confidence in the company's strong
outlook, significant free cash generation and benefits of the
actions announced today. Assuming successful completion of the
transactions, Emerson expects total net leverage to be less than 2x
by the end of fiscal year 2025 and expects to maintain its A2/A
credit rating.
Emerson Fourth Quarter and Full Year 2024 Results
In a separate press release this morning, Emerson announced
financial results for its fourth quarter and fiscal year 2024,
ended September 30, 2024, and
provided guidance for its fiscal 2025 year.
As previously announced, beginning at 7:00 a.m. Central Time / 8:00 a.m. Eastern Time today, Emerson management
will discuss fourth quarter and fiscal year 2024 results, as well
as the strategic actions announced today, during an investor
conference call. Participants can access a live webcast available
at www.emerson.com/investors at the time of the call. A replay of
the call will be available for 90 days. Conference call slides will
be posted in advance of the call on the company website.
Advisors
Goldman Sachs & Co. LLC and Centerview Partners LLC are
serving as financial advisors to Emerson, and Davis Polk & Wardwell LLP is serving as
legal advisor.
About Emerson
Emerson (NYSE: EMR) is a global technology and software company
providing innovative solutions for the world's essential
industries. Through its leading automation portfolio, including its
majority stake in AspenTech, Emerson helps hybrid, process and
discrete manufacturers optimize operations, protect personnel,
reduce emissions and achieve their sustainability goals. For more
information, visit Emerson.com.
Forward-Looking Statements
This communication contains forward-looking statements related
to Emerson, AspenTech and the proposed acquisition by Emerson of
the outstanding shares of common stock of AspenTech that Emerson
does not already own. These forward-looking statements are subject
to risks, uncertainties and other factors. All statements other
than statements of historical fact are statements that could be
deemed forward-looking statements, including all statements
regarding the intent, belief or current expectation of the
companies and members of their senior management team.
Forward-looking statements include, without limitation, statements
regarding the business combination and related matters, prospective
performance and opportunities, post-closing operations and the
outlook for the companies' businesses, including, without
limitation, future financial results, synergies, growth potential,
market profile, business plans and expanded portfolio; the
competitive ability and position of the combined company; filings
and approvals relating to the proposed transaction; the ability to
complete the proposed transaction and the timing thereof;
difficulties or unanticipated expenses in connection with
integrating the companies; and any assumptions underlying any of
the foregoing. Investors are cautioned that any such
forward-looking statements are not guarantees of future performance
and involve risks and uncertainties and are cautioned not to place
undue reliance on these forward-looking statements. Actual results
may differ materially from those currently anticipated due to a
number of risks and uncertainties. Risks and uncertainties that
could cause the actual results to differ from expectations
contemplated by forward-looking statements include: (1) the risk
that a transaction with AspenTech may not be agreed with the
AspenTech special committee; (2) the risk that the non-waivable
condition that the requisite majority of the holders of AspenTech
common stock which are unaffiliated with Emerson tender in or
approve the proposed transaction is not met; (3) the risk that a
transaction with AspenTech may not otherwise be consummated; (4)
uncertainties as to the timing of the transaction; (5) unexpected
costs, charges or expenses resulting from the proposed transaction;
(6) uncertainty of the expected financial performance of AspenTech
following completion of the proposed transaction; (7) failure to
realize the anticipated benefits of the proposed transaction;
(8) inability to retain and hire key personnel; (9) potential
litigation or regulatory approval requirements in connection with
the proposed transaction or other settlements or investigations
that may affect the timing or occurrence of the contemplated
transaction or result in significant costs of defense,
indemnification and liability; (10) evolving legal, regulatory
and tax regimes; (11) changes in economic, financial, political and
regulatory conditions, in the United
States and elsewhere, and other factors that contribute to
uncertainty and volatility, natural and man-made disasters, civil
unrest, pandemics, geopolitical uncertainty, and conditions that
may result from legislative, regulatory, trade and policy changes
associated with the current or subsequent U.S. administration;
(12) the ability of Emerson and AspenTech to successfully
recover from a disaster or other business continuity problem due to
a hurricane, flood, earthquake, terrorist attack, war, pandemic,
security breach, cyber-attack, power loss, telecommunications
failure or other natural or man-made event, including the ability
to function remotely during long-term disruptions; (13) the impact
of public health crises, such as pandemics and epidemics and any
related company or governmental policies and actions to protect the
health and safety of individuals or governmental policies or
actions to maintain the functioning of national or global economies
and markets, including any quarantine, "shelter in place," "stay at
home," workforce reduction, social distancing, shut down or similar
actions and policies; (14) actions by third parties, including
government agencies; (15) potential adverse reactions or changes to
business relationships resulting from the announcement of the
proposal or completion of the transaction; (16) the risk that
disruptions from the proposed transaction will harm Emerson's and
AspenTech's business, including current plans and operations; and
(17) other risk factors as detailed from time to time in the
companies' periodic reports filed with the U.S. Securities and
Exchange Commission (the "SEC"), including current reports on Form
8-K, quarterly reports on Form 10-Q and annual reports on Form
10-K. All forward-looking statements are based on information
currently available to Emerson, and Emerson assumes no obligation
and disclaim any intent to update any such forward-looking
statements.
Additional Information And Where To Find It
This communication relates to a proposal that Emerson has made
for an acquisition by Emerson of all of the shares of issued and
outstanding common stock of AspenTech not already owned by Emerson.
In furtherance of this proposal and subject to future developments,
Emerson may file one or more tender offer statements or other
documents with the SEC. This communication is not a substitute for
any tender offer statement or other document Emerson may file with
the SEC in connection with the proposed transaction.
Investors are urged to read the tender offer statements and/or
other documents filed with the SEC carefully in their entirety if
and when they become available, as they will contain important
information about the proposed transaction. Investors will be able
to obtain free copies of these documents (if and when available)
and other documents filed with the SEC by Emerson through the
website maintained by the SEC at http://www.sec.gov.
This communication shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any jurisdiction. A
solicitation and an offer to buy shares of AspenTech will be made
only pursuant to an offer to purchase and related materials that
Emerson may file with the SEC.
Any information concerning AspenTech contained in this
communication has been taken from, or based upon, publicly
available information. Although Emerson does not have any
information that would indicate that any information contained in
this communication that has been taken from such documents is
inaccurate or incomplete, Emerson does not take any responsibility
for the accuracy or completeness of such information.
Contacts
Investors:
Colleen
Mettler
(314) 553-2197
Letter to AspenTech Board of Directors
November 5, 2024
Board of Directors
Aspen Technology, Inc.
20 Crosby Drive
Bedford, MA 01730
Dear Members of the Board of Directors:
Emerson values the partnership created through the transaction
between our two companies that resulted in our majority ownership
of AspenTech. To realize the full potential for the AspenTech
business going forward, we believe now is the right time to
increase Emerson's ownership and fully integrate AspenTech as part
of Emerson.
To achieve this goal, Emerson Electric Co. ("Emerson") is
pleased to submit this proposal ("Proposal") to acquire all of the
outstanding shares of common stock of Aspen Technology, Inc.
("AspenTech" or the "Company") that Emerson does not already own
(excluding outstanding employee equity awards which will be rolled
over into equivalent Emerson equity awards) for a purchase price of
$240 per share in cash.
The concept of Emerson making a proposal to acquire the
remaining public float of AspenTech has been noted in shareholder
and analyst commentary since the expiration of the original
transaction standstill earlier this year. Speculation increased
significantly following commentary in Emerson's August 7th earnings call on the
strength of our balance sheet and the strategic fit of AspenTech
made in response to direct analyst questioning about the
possibility of a transaction. Since then, multiple research
analysts have published reports predicting an offer in the near
term.
In this period, based on the closing price yesterday,
AspenTech's share price has increased 34%, exceeding its prior
52-week high close of ~$222, and its
street consensus EV / NTM FCF multiple3 has
expanded over 44%. This compares to a peer
group4 that has on average seen stock
prices up 8% and street consensus EV / NTM FCF multiples up 5% over
the same period.
We believe our proposal offers compelling value to AspenTech's
shareholders and provides them with certain cash value and
immediate liquidity at a premium valuation. Our proposal values
AspenTech at a multiple of 39.0x street consensus estimates for
AspenTech's calendar year 2025 free cash
flow5, a multiple above the 38.2x forward
multiple paid in our original change of control transaction. Our
proposal also represents 44.4x FY2025 AspenTech's free cash flow as
guided by the Company at their September
17th Investor Day. Our proposal is not only compelling from
a valuation multiple perspective–it also represents an 8% premium
to the 52-week high through August 6,
2024 and a 35% premium to the Company's undisturbed share
price of $177.84 on August 6, 2024, such measures being just prior to
when active transaction speculation began in the market.
We also note AspenTech's Q1 earnings report yesterday included a
miss on consensus ACV, revenue, EPS and FCF. Following its earnings
call, AspenTech's stock price traded down $12.59 to $225.00
(as reported on Bloomberg at 7:31pm
EST yesterday).
We will not proceed with such a transaction unless a fully
empowered special committee comprising solely of independent and
disinterested directors, appointed by AspenTech's Board of
Directors and advised by independent legal and financial advisors,
recommends approval of such transaction to the AspenTech Board of
Directors. Our Proposal is that the transaction be effected by a
tender offer that would be subject to a non-waivable condition that
at least a majority of the AspenTech common stock held by minority
stockholders be tendered and not withdrawn in accordance with the
framework established under Kahn v. M&F Worldwide Corp.,
88 A.3d 635 (Del. 2014) and its progeny; and thereafter a merger
consummated at the same price without further stockholder
action.
We wish to emphasize that, in our capacity as a stockholder of
the Company, we are only interested in acquiring the shares of the
Company that we do not currently own, and accordingly we have no
interest in a disposition or sale of our holdings in the
Company.
Given our knowledge of AspenTech and our close working
relationship with the Company, we are in a position to move quickly
and do not need to complete additional diligence prior to signing a
definitive agreement. In addition, our counsel can share a draft of
a merger agreement which we believe can be negotiated promptly in
parallel to other discussions on our Proposal.
This Proposal is not subject to any financing condition and
would be financed from cash on hand, committed lines of credit
and/or other available sources of financing, and as such would not
be subject to any financing contingency. This Proposal is an
expression of interest only, and we reserve the right to withdraw
or modify our Proposal at any time. No legal obligation with
respect to our Proposal or any other transaction shall arise unless
and until mutually acceptable definitive transaction documentation
is executed between us.
We look forward to completing this transaction, allowing you to
achieve attractive and certain value for your remaining public
shareholders, and bringing our two companies fully together for
even greater strategic and operating success. We are available at
your convenience to discuss any aspects of our Proposal and look
forward to hearing from you soon.
Sincerely,
Lal Karsanbhai
President and Chief Executive Officer
1 Industrial software peers defined
as Autodesk Inc., Bentley Systems Incorporated, Dassault
Systemès SE, and PTC Inc.
2 Adjusted Segment EBITA margin of 24.5% was
adjusted for the following: 1.8% of amortization expense, 0.5% of
restructuring and related expense to arrive at a GAAP Segment EBIT
margin of 22.2%.
3 NTM FCF defined as the time weighted median of
consensus street research estimates for AspenTech's free cash flow
over the next twelve-month period, on any given date, as sourced
from Factset.
4 Peer group defined as Autodesk, Bentley Systems,
Dassault Systèmes, and PTC Inc.
5 Source: Factset
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