The Deal: Emerson Buys Out EGS Stake

 
Written by Lou Whiteman

NEW YORK (The Deal) -- Emerson Electric (EMR) said Wednesday, Dec. 4, it would buy out minority partner SPX's (SPW) 44.5% interest in EGS Electrical Group in a deal that values the stake at $571 million.
 
EGS is a manufacturer of electrical products including fittings and lighting used in hazardous and adverse environments for commercial markets including oil, gas and chemical. The two companies have jointly owned the business since 1997, with St. Louis-based Emerson owning a majority stake and taking responsibility for operational management. The unit had 2013 sales of more than $500 million.
 
Emerson Chairman and CEO David N. Farr in a statement said that EGS historically has served a niche North American market, but his company is increasingly seeing opportunities to blend its offerings with Emerson's process management and international channels.
 
"Emerging opportunities with our process management and industrial automation businesses make this the right time to assume full ownership and realize the synergies possible as a fully integrated business of Emerson," Farr said. "We are grateful for the strong partnership with SPX over the years."
 
The deal is expected to close within two months, subject to regulatory review. Emerson said it would consolidate EGS into its industrial automation segment.
 
Charlotte-based SPX said it expects to record an after-tax gain of about $300 million as a result of the sale, and book after-tax net proceeds of about $350 million. The company said proceeds would be used to reduce debt and repurchase shares. The company has been working to streamline its focus to flow control products, spending $771 million in 2011 to acquire ClydeUnion Pumps while selling SPX Service Solutions US LLC to Robert Bosch for $1.15 billion.
 
SPX Chairman and CEO Chris Kearney in a statement called EGS "a well-run business" that is "in a strong position for future success," but said the sale is consistent with his company's effort to narrow its focus.
 
"We believe today's announcement underscores our commitment to unlocking value for our shareholders through strategic management of our asset portfolio and disciplined execution of our capital allocation methodology," Kearney said.
 
A Barclays team of Ray Raimondi, Bob Cornell, Scott Mohr and Onur Eken advised Emerson.
 

More from Mergers and Acquisitions

Apple Buys Tesla? Amazon Buys Sears? 3 Dream Mergers That Just Make Sense

Apple Buys Tesla? Amazon Buys Sears? 3 Dream Mergers That Just Make Sense

AT&T-Time Warner Ruling Could Usher in More Healthcare Deals

AT&T-Time Warner Ruling Could Usher in More Healthcare Deals

Dropbox Soars in Third-Straight Record-Setting Session

Dropbox Soars in Third-Straight Record-Setting Session

Decision on AT&T's Merger With Time Warner Marks a Monumental Week for M&A

Decision on AT&T's Merger With Time Warner Marks a Monumental Week for M&A

JPM's Head of North America M&A Wants to Super-Charge M&A and Hire More Women

JPM's Head of North America M&A Wants to Super-Charge M&A and Hire More Women