Manufacturing heavyweight Emerson Electric Co has announced that it will merge its two business software units with Aspen Technology in an $11 billion deal. The cash-and-stock is expected to value AspenTech at around $160 per share.
The deal is expected to close in the second quarter of 2022.
This merger will strengthen Emerson’s industrial automation business that caters to a host of industries such as automotive, chemical, and mining. The merger will pave the way for a new industrial software company. Emerson’s grid modernization technology and geo-simulation software coupled with AspenTech’s manufacturing software will be a major part of the new company.
More about the Merger
Emerson Chief Executive, Lal Karsanbhai said that the company saw a decent window of opportunity to accelerate its software strategy. This merger enables them to strengthen their foothold in the evolving industrial software environment. He also added that their customers are looking for new software partners to automate their workflows and thereby improve their productivity.
The new company’s software will also support the sustainability requirements of the green energy industry. AspenTech shareholders will get $87 and 0.42 shares of the merged entity for every share they own right now.
Emerson also revealed that it will own 55% of the new company, while AspenTech shareholders will own the rest. The new business entity is likely to retain AspentTech’s name and will be headed by the present Chief Executive Officer, Antonio Pietri.
Similar Mergers in the Past
This is not the first time a manufacturing company has tied up with a software company at such as scale. This trend can be observed since 2017 when Schneider Electric took over Aveva by merging their industrial software units. In 2018, Rockwell Automation scooped a $1 billion stake in simulation software company PTC. Such deals have different creative structures and cannot be classified as complete takeovers.
Bank of America’s Chairman, TMT investment banking said that software firms ask for a higher valuation multiple due to their recurring business models and higher growth rates. This is why it is feasible for industrial firms to put their foot into the market in this manner.