Emerson and NI announced today that they have entered into a definitive agreement under which Emerson will acquire NI for $60 per share in cash, or a net value of $8.2 billion. Emerson already owns approximately 2.3 million shares of NI, or about 2 % of the outstanding shares, which were acquired at a weighted average price of $36.84. Therefore, Emerson's effective purchase price per share is $59.61.
NI provides automated test and measurement systems connected to software that enable companies to bring products to market faster and at lower cost. NI's solutions help customers solve current and future testing challenges and improve the speed and efficiency of their product development cycles. NI had revenues of $1.66 billion in 2022 and operates in more than 40 countries, serving approximately 35,000 customers in the semiconductor and electronics, transportation, aerospace and defense markets.
" We are pleased to enter into an agreement with NI, whose best-in-class test and measurement products and software accelerate Emerson's progress toward a coherent, higher-growth, higher-margin automation portfolio " said Lal Karsanbhai, president and CEO of Emerson.
" With this expansion into test and measurement, Emerson will strengthen its automation capabilities and gain more customers who rely on NI solutions at critical points in the product development cycle. These capabilities allow Emerson to diversify into attractive and growing discrete markets, such as semiconductor and electronics, transportation and electric vehicles, and aerospace and defense, which are poised to benefit from secular growth trends. NI's business is well aligned with our vision for automation and we look forward to working together to bring more comprehensive and innovative solutions to our customers, accelerate growth and position Emerson to deliver significant shareholder value" .
" We have conducted a robust and comprehensive process, reviewed a range of potential options, and believe this transaction represents the best outcome for all NI stakeholders. This transaction is a testament to the improvements and initiatives we have implemented over the past several years that have transformed NI into a software-focused company with stronger growth, improved profitability and lower cyclicality. We are pleased that Emerson recognizes the value we have created and believe they will help us build on our momentum to position NI as a leading provider of software-connected automated test and measurement systems."
Convincing strategic and financial rationale
- Balanced and Diversified End Markets: With favorable long-term trends and an estimated total priority market of $35 billion, the test and measurement market is fast-growing, highly complementary, and one of the four priority sectors presented by Emerson at its 2022 investor conference. The transaction is expected to create value and strengthen Emerson's position as a global leader in automation by expanding and diversifying its customer base in highly attractive end markets. With diversified end markets including semiconductor and electronics, transportation, aerospace and defense, NI should be well positioned to take advantage of megatrends that offer attractive growth opportunities. In markets such as semiconductor and electric vehicle manufacturing, NI enables Emerson to enter the design and validation phase of the life cycle, providing early access to customers. Overall, NI will increase Emerson's end market exposure in discrete markets to 18 % of sales, which will be Emerson's second largest industry segment.
- Complementary Software and Innovation Capabilities: NI's technology portfolio of industry-leading smart devices, controls and software complements Emerson's technology portfolio and will accelerate Emerson's efforts to create a cohesive, higher value industrial technology portfolio. NI's flexible and modular test solutions feature an open and interoperable software platform, a key element that enables customers to continuously evolve and automate their test processes in increasingly complex and rapidly changing end markets. With 20 % of its revenue in software, NI also increases Emerson's exposure to high-growth opportunities in industrial software. Both Emerson and NI share engineering cultures focused on innovation. With Emerson's experience in innovation and successful new product launches, the new company will be able to accelerate and expand the development of innovative offerings for customers, leveraging the complementary expertise of both organizations.
- Substantial synergies: Emerson has identified $165 million in cost synergies by the end of year five through the application of Emerson's management system best practices. Emerson intends to improve productivity and streamline redundant costs in general and administrative functions, sales and marketing, and research and development, while leveraging Emerson's manufacturing and supply chain scale. Additional opportunities to improve NI's free cash flow generation will be pursued through proven operational excellence and productivity levers.
- Strong financial profile and attractive shareholder returns: The transaction is expected to be immediately accretive to Emerson's adjusted earnings per share and long-term financial targets outlined at the 2022 investor conference. NI's strong positions in attractive and growing markets are expected to generate sustainable underlying growth aligned with Emerson's underlying growth target of 4-7 % over the cycle. NI also brings significant recurring revenue and immediate gross margin expansion to Emerson's combined portfolio. The combination of strong growth, attractive gross margins, and the potential for synergies to increase operating margins contribute to returns in line with Emerson's stated performance criteria.
- Uniting aligned corporate cultures: NI's innovation and problem-solving culture is highly complementary to Emerson's innovation-driven culture. Employees will have more opportunities for career development and advancement within Emerson.
Transaction terms and approvals
The transaction has been approved by the boards of directors of Emerson and NI. Under the terms of the agreement, NI shareholders will receive $60 per share in cash, which represents a premium of 49 % to NI's closing share price on January 12, 2023, the day before NI publicly announced a strategic review.
The transaction is expected to close in the first half of Emerson's 2024 fiscal year, subject to the satisfaction of customary closing conditions, including regulatory approvals and NI shareholder approval. Emerson expects to fund the transaction using available cash and liquidity, including approximately $8 billion in after-tax proceeds from the majority sale of Climate Technologies to Blackstone announced in October 2022, which is expected to close in the second calendar quarter of 2023.
Emerson reaffirms guidance for second quarter 2023
On February 8, 2023, Emerson provided guidance for second quarter underlying revenue growth from continuing operations of 8 % to 10 % and adjusted earnings per share guidance of 0.95 $ to 1.00 $. Emerson reaffirms this guidance.
Conference call and investor presentation
Emerson management will discuss the transaction on a conference call with investors today, April 12, 2023, beginning at 7:30 a.m. Central / 8:30 a.m. Eastern time. Participants can access a live webcast available at www.Emerson.com/en-us/investors at the time of the call. A replay of the call will be available for 90 days. Conference call slides will be released prior to the call.
NI plans to release its fiscal 2023 first quarter results after the market closes on April 27, 2023. In light of the pending acquisition of NI by Emerson, NI will not host a first quarter earnings conference call.