Emerson is selling part of his business, says he will consider leaving St. Louis

Emerson said it plans to sell most of its Climate Technologies business to private equity funds managed by New York-based investment firm Blackstone. Climate Technologies will be established as a joint venture between Emerson and Blackstone.

As part of the deal, Emerson will sell ownership of the Ferguson campus to the new joint venture and take a three-year lease on the headquarters, which employs about 1,300 people. The company will have the option to extend the lease term by two years.

In the meantime, CFO Frank Dellaquila said during a call with investors Monday morning that the company will conduct a “comprehensive evaluation of potential headquarters locations.” A company spokeswoman said Emerson is evaluating potential headquarters “both in the St. Louis area and outside” and that the decision “will be made based on the best strategic interests of the company.”

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

“But we are competing in a global marketplace for talent and investment,” Hall said. “All of us in St. Louis urgently need to work together to proactively use our strengths and roll up our sleeves to solve our problems. Our future depends on it.”

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

Last year, the company spun off two businesses in its commercial and residential solutions space: garbage disposal brand InSinkErator and Therm-O-Disc, a maker of parts and sensors for temperature control systems.

Karsanbhai led the company’s automation solutions segment until becoming CEO in February 2021, succeeding longtime CEO David Farr.

Jeff Windau, an industry analyst at Edward Jones, said he sees the sale of Climate Technologies as a win for investors. It’s a move toward higher growth and profitability, he said, although with a narrower portfolio, there may be more volatility in the share price.

The Climate Technologies business manufactures HVAC and refrigeration compression products. Its brands include Copeland, Vilter, Dixell, White-Rodgers and Sensi. It generated $5 billion in revenue through fiscal year 2022 and employs approximately 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 $9.5 billion in cash proceeds and retain a non-controlling interest.

Proceeds from the deal will be used to invest in growth and acquisitions. Pressed by an analyst for more details during a conference call on Monday, Karsanbhai replied: “I know you want me to start listing the names of the companies. I can’t do that.” But, he added: “Obviously, we’re looking for big opportunities in big markets.”

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