Blackstone said it was acquiring a controlling stake in Emerson’s heating and aircon division. The transaction employs an unusual structure similar to one Blackstone used successfully in a deal with Thomson Reuters, writes johnsfoley
. Because debt accounted for around two-thirds of the purchase price, the quick sale roughly doubled the value of Blackstone and Thomson Reuters’ equity investments.
A re-run isn’t out of the question. For one, Blackstone is buying when valuations have slumped. The sale values Emerson’s subsidiary at 12.7 times EBITDA – lower than the 14 times at which its parent company traded a little over a year ago. If debt markets thaw, other buyers might regain their interest in the business, opening up the possibility of another quick sale. Market conditions may be unprecedented, but Blackstone’s knack for spotting a clever deal looks familiar.Emerson Electric on Oct.
Private equity group Blackstone will contribute $4.4 billion in cash, receiving a 55% equity stake in the business and a $2 billion convertible preferred note. The business will take on $5.5 billion of debt. Emerson, an industrial conglomerate that makes industrial instruments and software, will retain 45% of the division’s equity and a note worth $2.25 billion. It will receive $9.5 billion in cash, before tax.
The business, which is known as Climate Technologies, generated EBITDA of $1.1 billion in the fiscal year ending Sept. 30, suggesting a valuation of 12.7 times EBITDA.Editing by Peter Thal Larsen and Amanda GomezOpinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
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