Emerson Electric Company
) recently divested 51% stake in its embedded computing and power
business to private equity investment firm Platinum Equity,
retaining the remaining 49% non-controlling ownership stake in
Platinum Equity is a global leader specializing in mergers,
acquisitions and operations 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.
In August this year, Emerson had announced its decision to
divest the business and the deal was valued at approximately $300
million. The deal was expected to close in a span of three to six
months after gaining regulatory approvals. However, fast
regulatory approvals allowed the deal to close well before six
months, resulting in $175 million lower-than-previously expected
sales and about $25 million less pretax earnings in the first
quarter and full year 2014 for Emerson.
According to the agreement, the embedded computing and power
business will continue to operate as an independent company after
the divestiture. Emerson intends to use the equity method of
accounting to report sales and earnings generated from the
Emerson's embedded computing and power business is one of the
major providers of designs and technologies that are used in
communication as well as computing equipment and other
applications. The business was deemed to be a strategic misfit
for Emerson's portfolio. The company also cited weaker demand
from the technology equipment and mobile device markets as one of
primary reasons for the divestiture.
Post divesture, 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 holds a Zacks Rank #3 (Hold). Other
companies in the industry that are worth considering at the
AO Smith Corp.
Alamo Group, Inc.
). AO Smith Corp has a Zacks Rank #1 (Strong Buy), while Rexnord
Corp. and Alamo Group both carry a Zacks Rank #2 (Buy).
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EMERSON ELEC CO (EMR): Free Stock Analysis
REXNORD CORP (RXN): Free Stock Analysis
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