Emerson sells part of business, says it would consider leaving St. Louis

Emerson said it plans to sell a majority stake in its Climate Technologies business to private equity funds managed by Blackstone, a New York-based investment firm. Climate Technologies will be structured as a joint venture between Emerson and Blackstone.

As part of the transaction, Emerson will sell ownership of its Ferguson campus to the new joint venture, and enter a three-year lease on the headquarters, where about 1,300 employees work. The company would have the option to extend the lease two years.

During that time, CFO Frank Dellaquila said during a call with investors Monday morning, the company will undertake “a comprehensive assessment of potential headquarter locations.” A company spokesperson said Emerson is evaluating potential headquarters “both inside and outside the St. Louis area,” and the decision “will be made based on the best strategic interest of the company.”

Jason Hall, CEO of Greater St. Louis, said he spoke with Emerson President and CEO Lal Karsanbhai Monday morning, and made the case for Emerson to stay in the region.

“But we compete in a global market for talent and investment,” Hall said in a statement. “All of us in St. Louis must work together with urgency to capitalize proactively on our strengths and roll up our sleeves to address our challenges. Our future depends upon it.”

Karsanbhai called Monday’s announcement a “critical milestone” in the company’s efforts to become a pure-play business fully focused on its automation brands. 

In the past year the company has jettisoned two businesses from the commercial and residential solutions side: InSinkErator, the garbage disposal brand, and Therm-O-Disc, a maker of parts and sensors for temperature control systems.

Karsanbhai led the company’s automation solutions segment before he became chief executive in February of 2021, succeeding longtime CEO David Farr.

Jeff Windau, an industrials analyst with Edward Jones, said he viewed the Climate Technologies sale as a win for investors. It’s a move toward higher growth and profitability, he said, though with a narrower portfolio there may be more volatility in the stock price.

The Climate Technologies business manufactures HVAC and refrigeration compression products. Its brands include Copeland, Vilter, Dixell, White-Rodgers and Sensi. It brought in $5 billion in revenues during the 2022 fiscal year and employs about 18,000 people.

The deal values Climate Technologies at $14 billion. The sale is expected to close in the first half of 2023. Emerson will receive cash proceeds of $9.5 billion and retain a non-controlling ownership interest.

The proceeds from the deal will be used to invest in growth and acquisition. Pressed by an analyst for more detail during Monday’s conference call, Karsanbhai responded: “I know you want me to start listing names of companies. I can’t do that.” But, he added, “Clearly we’re looking for sizeable opportunities in large markets.”

Emerson reported quarterly earnings on Monday. Revenues were $5.4 billion for the quarter that ended on Sept. 30, up from $4.9 billion during the same quarter last year. Net earnings were $740 million, up from $670 million during the same quarter last year.