Emerson to Receive 55% Stake of New
AspenTech
AspenTech Shareholders to Receive Approximately
$87 Per Share in Cash and 0.42 Shares of New AspenTech for each
AspenTech Share, Providing Upside through 45% Stake
New AspenTech Expected to Drive Double-Digit
Annual Spend Growth, Best-in-Class Profitability, Strong Free Cash
Flow and Be Positioned to Pursue and Complete Strategic
Transactions
Emerson Reaffirms Fiscal Year 2021 Underlying
Sales Guidance of 5% to 6% and Adjusted EPS Guidance of $4.06 to
$4.08
Companies to Host a Joint Conference Call Today
at 8:30 AM ET
Emerson (NYSE: EMR) and AspenTech (NASDAQ: AZPN) today announced
that the companies have entered into a definitive agreement to
contribute Emerson’s industrial software businesses – OSI Inc. and
the Geological Simulation Software business – to AspenTech to
create a diversified, high-performance industrial software leader
with greater scale, capabilities and technologies (“new
AspenTech”). Emerson will also contribute $6.0 billion in cash to
new AspenTech, which will be received by AspenTech shareholders, in
exchange for a 55% stake in new AspenTech. New AspenTech will offer
a highly differentiated industrial software portfolio with the
capabilities to support the entire lifecycle of complex operations
across a wide range of industry verticals, including design and
engineering, operations, maintenance and asset optimization.
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Accelerating Emerson’s Industrial Software Strategy The
transaction accelerates Emerson’s software investment strategy as
the company continues to build a higher growth, more diversified
and sustainable portfolio, by creating an industrial software
company with immediate scale and relevancy in a fast-paced and
evolving market. The new company, which will retain the name
AspenTech, enables Emerson to realize significant synergies and
accelerate its software strategy to drive meaningful value
creation. Majority ownership position in a highly valued, pure-play
industrial software leader will give Emerson the platform and
flexibility to strategically deploy capital for growth through
continued investment and M&A. The transaction continues
Emerson’s long history of delivering shareholder value. New
AspenTech will be fully consolidated into Emerson financials and is
expected to be accretive to adjusted EPS after year one.
Management Comments “We saw an attractive opportunity to
accelerate our software strategy to capitalize on the rapidly
evolving industrial software landscape and advance Emerson’s high
value portfolio journey,” said Lal Karsanbhai, President and Chief
Executive Officer of Emerson. “Our customers are increasingly
seeking partners to help realize stronger performance as they
automate workflows in their facilities to optimize operations. New
AspenTech will become an engine for both acquisition and organic
growth.”
“Today’s announcement marks an exciting new era. This
transaction enables us to advance our position as a premier, highly
diversified industrial software leader poised for significant
growth, strong financial performance and a vehicle to drive future
software acquisitions, while providing immediate cash value to
AspenTech shareholders,” said Antonio Pietri, President and Chief
Executive Officer of AspenTech, who will lead new AspenTech. “The
new AspenTech will benefit from a larger and more diversified
market, which we will be able to serve with a comprehensive
software portfolio, an expanded global sales channel and an even
stronger balance sheet reinforced by Emerson. Additionally, this
transaction expands our ability to support customers’ global
sustainability ambitions.”
Emerson and AspenTech Creating a High-Performance Software
Leader with Scale and Technology Following completion of the
transaction, new AspenTech will have a global footprint with strong
go-to-market capabilities and more than 3,700 employees. On a pro
forma basis, new AspenTech is expected to have FY22 annual revenues
of $1.1 billion, adjusted EBITDA of approximately $490 million and
achieve double-digit annual spend growth through 2026. New
AspenTech will have a high growth, predictable business model with
86% of pro forma revenues from software and 14% of revenues from
services.
The new AspenTech will be an attractive environment for highly
sought-after software talent, offering career opportunities to
innovate in a technology-driven culture.
Benefits of the transaction include:
- New AspenTech Portfolio Spans the Full Asset Lifecycle:
The new AspenTech will provide differentiated offerings in
Industrial AI and asset optimization with Emerson’s grid
modernization technology, advanced distribution management systems
and geological simulation software. With Emerson’s strong
capabilities, new AspenTech will have an end-to-end software
offering and be even better positioned to help customers improve
their safety, reliability and production while reducing
emissions.
- Diversified End Markets with Blue-Chip Customer Base:
With the additional capabilities of OSI Inc. and Geological
Simulation Software, new AspenTech will expand into new, high
growth markets. AspenTech recently announced a commitment to invest
$35 million in life sciences and metals and mining that will help
accelerate adoption of new AspenTech’s solutions. The addition of
OSI Inc. will enable new AspenTech to develop its transmission and
distribution offering to support power grid modernization and
ensure grid reliability. This expanded software capability will
build on Emerson’s global life sciences expertise comprised of
3,000 installed control systems, 30 locations and nearly 1,000
project engineering and consulting employees dedicated to active
life sciences projects. New AspenTech’s software is also scalable
and adaptable to the emerging green energy markets and will be
well-positioned to support blue-chip customers’ sustainability
needs in current and new energy transition markets such as
biofuels, hydrogen and carbon capture.
- Significant Revenue and Cost Synergy Opportunities: Over
time, new AspenTech is expected to drive significant revenue and
synergy opportunities by transitioning OSI Inc. and the Geological
Simulation Software business to a token and subscription-based
business model, which AspenTech has successfully achieved for its
existing portfolio. The token model enables customers to access a
broader suite of software modules. The transaction will enhance the
two companies’ existing commercial alliance and increase
collaboration between Emerson and new AspenTech as they share
technologies, drive innovation and develop new products through
their nearly 1,400 software engineers. New AspenTech expects to
deliver multiple, specific revenue growth opportunities by
leveraging Emerson’s $120 billion global installed base and its
sales force of nearly 12,000 salespeople. Cost synergies are
expected to be driven by scale efficiencies, including shared
R&D and SG&A organizations, overhead and spend
optimization. New AspenTech expects to achieve $110 million of
total EBITDA synergies by year five, of which $40 million are from
cost savings. Emerson also expects to benefit from the enhanced
commercial alliance with new AspenTech, driving $45 million of
EBITDA synergies.
- Best-in-Class Financial Profile: New AspenTech will be a
leading player in the industrial software market with scale and
strong free cash flow generation to drive innovation and growth. On
a pro forma basis, the company is expected to deliver double-digit
revenue and free cash flow growth over the next five years. Over
time, as new AspenTech delivers on its synergy opportunities and
completes the business model transitions of the OSI Inc. and
Geological Simulation Software businesses, it is expected to
deliver a higher software and recurring revenue mix and stronger
adjusted EBITDA and free cash flow margins.
- Strong Platform for Future Acquisitions: Mergers and
acquisitions will be a key pillar of new AspenTech’s go-forward
strategy given the continued evolution and consolidation of the
industrial software industry. With an expanded solution set,
broader global footprint and larger installed base, new AspenTech
will have access to a wider range of acquisition and investment
targets across industries, products and geographies. With greater
financial flexibility and the support of a well-capitalized
Emerson, new AspenTech will have the scale and financial capacity
to pursue and complete larger strategic transactions, quickly
integrate targets and realize synergies.
Terms of the Transaction Under the terms of the
agreement, AspenTech shareholders will receive approximately $87
per share in cash and 0.42 shares of common stock of the new
AspenTech, a newly formed company, for each share of AspenTech
common stock they own, which implies total consideration of
approximately $160 per AspenTech share, and a total transaction
equity value of approximately $11 billion before synergies. The
total implied per share consideration amount represents a premium
of approximately 27% compared to AspenTech’s closing stock price on
October 6, 2021, the last trading day prior to media speculation
regarding a potential transaction, and a premium of approximately
26% to AspenTech’s 30-day VWAP on October 6, 2021. Including
expected synergies, the total value increases to $176 per share, a
40% premium compared to AspenTech’s closing stock price on October
6, 2021. Upon completion of the transaction, Emerson will own 55%
of the new AspenTech on a fully diluted basis and AspenTech
shareholders will own 45%.
Conclusion of Strategic Process Following a comprehensive
review of AspenTech’s strategic opportunities to increase
shareholder value, AspenTech’s Board concluded that Emerson is the
ideal strategic partner for AspenTech and that this transaction
structure provides the best opportunity to drive continued growth.
Additionally, the transaction delivers immediate cash value to
AspenTech shareholders, while also enabling them to participate in
the long-term upside of new AspenTech.
New AspenTech Headquarters, Leadership and Governance New
AspenTech will be headquartered in Bedford, Massachusetts and
Antonio Pietri, the current CEO of AspenTech, will be the CEO.
Following the close of the transaction, the Board of Directors
of new AspenTech will consist of nine directors, five of whom will
be designated by Emerson. Jill Smith, the current Chair of the
Board of Directors AspenTech, will serve as Chair of the Board of
Directors of new AspenTech.
Path to Completion The transaction has been approved
unanimously by Emerson’s Board of Directors, and by unanimous vote
of those AspenTech directors present (one director was absent, but
confirmed full support). The transaction is expected to close in
the second calendar quarter of 2022 and is subject to approval by
AspenTech shareholders, regulatory approvals and other customary
closing conditions. Upon completion of the transaction, new
AspenTech will trade on NASDAQ under ticker symbol AZPN.
Emerson’s 2021 Fiscal Year Performance Outlook On August
4, 2021, Emerson provided fiscal year 2021 underlying sales
guidance of 5% to 6% and adjusted EPS guidance of $4.06 to $4.08.
Emerson is reaffirming this guidance and will provide complete
results on November 3, 2021.
AspenTech Provides Preliminary Update on First Quarter Fiscal
2022 Results AspenTech expects annual spend to be approximately
$629 million at the end of the first quarter of fiscal 2022, which
represents an increase of 5.5% compared to the first quarter of
fiscal 2021.
Conference Call The two companies will host a conference
call today, October 11, 2021, at 7:30 AM CT / 8:30 AM ET to discuss
the transaction. The live webcast can be accessed at
emerson.com/financial or ir.aspentech.com. The webcast can also be
accessed by dialing 1-800-242-0681 (domestic) or 1-412-858-5210
(international) and asking to join the Emerson call. A replay of
the call will be available for 90 days. Associated presentation
materials regarding the transaction will be available on the
investor relations sections of Emerson’s website at
emerson.com/financial or AspenTech’s website at ir.aspentech.com
and https://aspentech.dealfacts.com/.
Advisors Goldman Sachs & Co. LLC and Centerview
Partners LLC are serving as financial advisors to Emerson, and
Davis Polk & Wardwell LLP is serving as legal counsel. J.P.
Morgan Securities LLC is serving as financial advisor to AspenTech,
and Skadden, Arps, Slate, Meagher & Flom LLP is serving as
legal counsel.
About Emerson Emerson (NYSE: EMR), headquartered in St.
Louis, Missouri (USA), is a global technology and engineering
company providing innovative solutions for customers in industrial,
commercial and residential markets. Our Automation Solutions
business helps process, hybrid and discrete manufacturers maximize
production, protect personnel and the environment while optimizing
their energy and operating costs. Our Commercial and Residential
Solutions business helps ensure human comfort and health, protect
food quality and safety, advance energy efficiency and create
sustainable infrastructure. For more information visit
Emerson.com.
About Aspen Technology Aspen Technology (AspenTech) is a
global leader in asset optimization software. Its solutions address
complex, industrial environments where it is critical to optimize
the asset design, operation and maintenance lifecycle. AspenTech
uniquely combines decades of process modelling expertise with
artificial intelligence. Its purpose-built software platform
automates knowledge work and builds sustainable competitive
advantage by delivering high returns over the entire asset
lifecycle. As a result, companies in capital-intensive industries
can maximize uptime and push the limits of performance, running
their assets safer, greener, longer and faster. Visit AspenTech.com
to find out more.
Additional Information and Where to Find It In connection
with the proposed transaction between Emerson Electric Co.
(“Emerson”) and Aspen Technology, Inc. (“AspenTech”), a subsidiary
of Emerson, Emersub CX, Inc. (“new AspenTech”), will prepare and
file with the Securities and Exchange Commission (the “SEC”) a
registration statement on Form S-4 that will include a combined
proxy statement/prospectus of new AspenTech and AspenTech (the
“Combined Proxy Statement/Prospectus”). AspenTech and new AspenTech
will prepare and file the Combined Proxy Statement/Prospectus with
the SEC, and AspenTech will mail the Combined Proxy
Statement/Prospectus to its stockholders and file other documents
regarding the proposed transaction with the SEC. This communication
is not a substitute for any proxy statement, registration
statement, proxy statement/prospectus or other documents AspenTech
and/or new AspenTech may file with the SEC in connection with the
proposed transaction. BEFORE MAKING ANY VOTING OR INVESTMENT
DECISION, INVESTORS, SECURITY HOLDERS OF EMERSON AND SECURITY
HOLDERS OF ASPENTECH ARE URGED TO READ CAREFULLY AND IN THEIR
ENTIRETY THE COMBINED PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES
AVAILABLE AND THE OTHER DOCUMENTS THAT ARE FILED OR WILL BE FILED
BY ASPENTECH OR NEW ASPENTECH WITH THE SEC, AS WELL AS ANY
AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, IN CONNECTION WITH
THE PROPOSED TRANSACTION, BECAUSE THESE DOCUMENTS CONTAIN OR WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND
RELATED MATTERS. Investors and security holders will be able to
obtain free copies of the Combined Proxy Statement/Prospectus and
other documents filed with the SEC by AspenTech and/or new
AspenTech without charge through the website maintained by the SEC
at www.sec.gov or by contacting the investor relations department
of Emerson or AspenTech:
Emerson
AspenTech
8000 West Florissant Avenue, P.O. Box
4100
20 Crosby Drive
St. Louis, MO 63136
www.emerson.com/en-us/investors
Colleen Mettler, Vice President, Investor
Relations
(314) 553-2197
investor.relations@emerson.com
Bedford, MA 01730
http://ir.aspentech.com/
Brian Denyeau
ICR
Brian.Denyeau@icrinc.com
No Offer or Solicitation This communication is for
informational purposes only and is not intended to and does not
constitute an offer to subscribe for, buy or sell, the solicitation
of an offer to subscribe for, buy or sell or an invitation to
subscribe for, buy or sell any securities or the solicitation of
any vote or approval in any jurisdiction pursuant to or in
connection with the proposed transaction or otherwise, nor shall
there be any sale, issuance or transfer of securities in any
jurisdiction in contravention of applicable law. No offer of
securities shall be made except by means of a prospectus meeting
the requirements of Section 10 of the Securities Act of 1933, as
amended, and otherwise in accordance with applicable law.
Participants in the Solicitation Emerson, AspenTech, new
AspenTech and certain of their respective directors and executive
officers and other members of their respective management and
employees may be deemed to be participants in the solicitation of
proxies in connection with the proposed transaction. Information
regarding the persons who may, under the rules of the SEC, be
deemed participants in the solicitation of proxies in connection
with the proposed transaction, including a description of their
direct or indirect interests in the transaction, by security
holdings or otherwise, will be set forth in the Combined Proxy
Statement/Prospectus and other relevant materials when it is filed
with the SEC. Information regarding the directors and executive
officers of Emerson is contained in Emerson’s proxy statement for
its 2021 annual meeting of stockholders, filed with the SEC on
December 11, 2020, its Annual Report on Form 10-K for the year
ended September 30, 2020, which was filed with the SEC on November
16, 2020 and certain of its Current Reports filed on Form 8-K.
Information regarding the directors and executive officers of
AspenTech is contained in AspenTech’s proxy statement for its 2021
annual meeting of stockholders, filed with the SEC on December 9,
2020, its Annual Report on Form 10-K for the year ended June 30,
2021, which was filed with the SEC on August 18, 2021 and certain
of its Current Reports filed on Form 8-K. These documents can be
obtained free of charge from the sources indicated above.
Caution Concerning Forward-Looking Statements This
communication contains “forward-looking” statements as that term is
defined in Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended
by the Private Securities Litigation Reform Act of 1995. All
statements, other than historical facts, are forward-looking
statements, including: statements regarding the expected timing and
structure of the proposed transaction; the ability of the parties
to complete the proposed transaction considering the various
closing conditions; the expected benefits of the proposed
transaction, such as improved operations, enhanced revenues and
cash flow, synergies, growth potential, market profile, business
plans, expanded portfolio and financial strength; the competitive
ability and position of new AspenTech following completion of the
proposed transaction; legal, economic and regulatory conditions;
and any assumptions underlying any of the foregoing.
Forward-looking statements concern future circumstances and results
and other statements that are not historical facts and are
sometimes identified by the words “may,” “will,” “should,”
“potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,”
“estimate,” “overestimate,” “underestimate,” “believe,” “plan,”
“could,” “would,” “project,” “predict,” “continue,” “target” or
other similar words or expressions or negatives of these words, but
not all forward-looking statements include such identifying words.
Forward-looking statements are based upon current plans, estimates
and expectations that are subject to risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those indicated or
anticipated by such forward-looking statements. We can give no
assurance that such plans, estimates or expectations will be
achieved and therefore, actual results may differ materially from
any plans, estimates or expectations in such forward-looking
statements.
Important factors that could cause actual results to differ
materially from such plans, estimates or expectations include,
among others: (1) that one or more closing conditions to the
transaction, including certain regulatory approvals, may not be
satisfied or waived, on a timely basis or otherwise, including that
a governmental entity may prohibit, delay or refuse to grant
approval for the consummation of the proposed transaction, may
require conditions, limitations or restrictions in connection with
such approvals or that the required approval by the stockholders of
AspenTech may not be obtained; (2) the risk that the proposed
transaction may not be completed in the time frame expected by
Emerson, AspenTech or new AspenTech, or at all; (3) unexpected
costs, charges or expenses resulting from the proposed transaction;
(4) uncertainty of the expected financial performance of new
AspenTech following completion of the proposed transaction; (5)
failure to realize the anticipated benefits of the proposed
transaction, including as a result of delay in completing the
proposed transaction or integrating the industrial software
business of Emerson with the business of AspenTech; (6) the ability
of new AspenTech to implement its business strategy; (7)
difficulties and delays in achieving revenue and cost synergies of
new AspenTech; (8) inability to retain and hire key personnel; (9)
the occurrence of any event that could give rise to termination of
the proposed transaction; (10) potential litigation in connection
with the proposed transaction or other settlements or
investigations that may affect the timing or occurrence of the
contemplated transaction or result in significant costs of defense,
indemnification and liability; (11) evolving legal, regulatory and
tax regimes; (12) changes in economic, financial, political and
regulatory conditions, in the United States and elsewhere, and
other factors that contribute to uncertainty and volatility,
natural and man-made disasters, civil unrest, pandemics (e.g., the
coronavirus (COVID-19) pandemic (the “COVID-19 pandemic”)),
geopolitical uncertainty, and conditions that may result from
legislative, regulatory, trade and policy changes associated with
the current or subsequent U.S. administration; (13) the ability of
Emerson, AspenTech and new AspenTech to successfully recover from a
disaster or other business continuity problem due to a hurricane,
flood, earthquake, terrorist attack, war, pandemic, security
breach, cyber-attack, power loss, telecommunications failure or
other natural or man-made event, including the ability to function
remotely during long-term disruptions such as the COVID-19
pandemic; (14) the impact of public health crises, such as
pandemics (including the COVID-19 pandemic) and epidemics and any
related company or governmental policies and actions to protect the
health and safety of individuals or governmental policies or
actions to maintain the functioning of national or global economies
and markets, including any quarantine, “shelter in place,” “stay at
home,” workforce reduction, social distancing, shut down or similar
actions and policies; (15) actions by third parties, including
government agencies; (16) potential adverse reactions or changes to
business relationships resulting from the announcement or
completion of the transaction; (17) the risk that disruptions from
the proposed transaction will harm Emerson’s and AspenTech’s
business, including current plans and operations; (18) certain
restrictions during the pendency of the acquisition that may impact
Emerson’s or AspenTech’s ability to pursue certain business
opportunities or strategic transactions; (19) Emerson’s,
AspenTech’s and new AspenTech’s ability to meet expectations
regarding the accounting and tax treatments of the proposed
transaction; and (20) other risk factors as detailed from time to
time in Emerson’s and AspenTech’s reports filed with the SEC,
including Emerson’s and AspenTech’s annual report on Form 10-K,
periodic quarterly reports on Form 10-Q, periodic current reports
on Form 8-K and other documents filed with the SEC. These risks, as
well as other risks associated with the proposed transaction, will
be more fully discussed in the Combined Proxy Statement/Prospectus.
While the list of factors presented here is, and the list of
factors to be presented in the Combined Proxy Statement/Prospectus
will be, considered representative, no such list should be
considered to be a complete statement of all potential risks and
uncertainties. Unlisted factors may present significant additional
obstacles to the realization of forward-looking statements.
Any forward-looking statements speak only as of the date of this
communication. Neither Emerson, AspenTech nor new AspenTech
undertakes any obligation to update any forward-looking statements,
whether as a result of new information or development, future
events or otherwise, except as required by law. Readers are
cautioned not to place undue reliance on any of these
forward-looking statements.
Reconciliations of Non-GAAP Financial Measures – New Aspen
Tech: Adjusted EBITDA:
FY 2022 Income /
(Loss) from operations (GAAP)
$(220)
Amortization of intangibles and depreciation
670
Stock-based compensation
40
Adjusted EBITDA (non-GAAP)
$490
The EBITDA associated with synergies of $110 million, which
includes $40 million from cost synergies, is equal to GAAP Income /
(Loss) from operations.
Reconciliations of Non-GAAP
Financial Measures – Emerson: Underlying Sales
Change:
FY 2021 Reported (GAAP) 9% - 10% (Favorable) /
Unfavorable FX
(3)%
Acquisitions / Divestitures
(1)%
Underlying (non-GAAP) 5% - 6% Adjusted Earnings Per Share:
FY 2021 Reported (GAAP) $3.78 - $3.80 Restructuring
.24
OSI purchase accounting items and fees
.07
Equity investment gain
(.03)
Adjusted Earnings Per Share $4.06 - $4.08 The EBITDA
associated with synergies of $45 million is equal to GAAP Earnings
before income taxes.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211011005304/en/
For Emerson: Investor Relations: Colleen Mettler
(314) 553-2197 Colleen.mettler@emerson.com Media: Casey
Murphy 217-414-5950 casey.murphy@fleishman.com
For AspenTech: Investor Relations: Brian Denyeau
ICR Brian.Denyeau@icrinc.com Media: Andrew Cole / Chris
Kittredge / Frances Jeter Sard Verbinnen & Co.
AspenTech-SVC@sardverb.com
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