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Emerson Sheds Network Power Business to Simplify Operations - Analyst Blog

In order to streamline its operations, Emerson Electric Co.EMR has disclosed the tax-free spin-off of its Network Power business. Apart from this, Emerson will comprehensively evaluate its operations and realign it to sharpen its focus.

Post divestiture, the Network Power business will operate as a standalone publicly traded company and will become one of the largest supplier of thermal management, A/C and D/C power, transfer switches, services and infrastructure management systems for the telecommunications and data center industries.

With the divestiture of this segment, the company will now particularly explore strategic opportunities for the growth of its Motors and Drives, Power Generation and rest of the Storage Businesses. Emerson intends to use the deal proceeds for enhancement of its shareholders' wealth.

All these transactions, collectively, are expected to be complete by Sep 30, 2016. Notably, the Network Power segment spin-off deal is devoid of Emerson's stakeholders' approval. JPMorgan Chase & Co. JPM and Centerview Partners acted as the financial advisors of the transactions.

For Emerson, this divestiture is a viable option as the Network Power business is not aligned with its long-term goals and strategies. Further, the company's Network Power business had been hit hard by decrease in global demand by telecommunications customers. Additionally, Emerson's Data Center business is posting a weak sales figure due to slowdown in infrastructure investments, which is expected to continue in the coming quarters too.

In connection to this, in May last year, Emerson had divested its connectivity solutions business under its Network Power segment to Bel Fuse Inc. for $98 million. Hence, we believe the company's latest move is a strategic fit and will strengthen its credibility as the global leader in seamlessly amalgamating technology with engineering. This will go a long way in enhancing the profitability of this Zacks Rank #5 (Strong Sell) stock.

Better-ranked stocks in the industry include Albany International Corp. AIN and Global Brass and Copper Holdings, Inc. BRSS . Both stocks sport a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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