Emerson offers $240/share in cash to buy up rest of AspenTech

The PLMish news flow is just insane right now --still trying to get to a longer post about Siemens acquiring Altair-- and now this:

Last night, AspenTech announced what I'd call middling results for its typically weak first quarter; more on that later. But they were good enough for Emerson Electric this morning to offer AspenTech shareholders $240 per share to buy up the 45% or so of AspenTech shares that it doesn't already own. Given that AspenTech shares closed yesterday at $238 before its earnings release, that's not a big incentive to sell -- though Emerson casts it differently, saying that the $240 per share "represents a 35% premium to the company's undisturbed share price of $177.84 on August 6, 2024, and an 8% premium to the undisturbed 52 week high of $221.94 through August 6, 2024." Why use August 6 as a benchmark? That's the last day before Emerson's August 7 earnings call, when the market began speculating about such a deal. Emerson says that AspenTech's share price increased 34% since August 6, while the S&P500 rose 9% over the same period. Emerson believes that August 6 represents a more fair (to it) point of comparison for the offer than yesterday's closing price. We'll see how investors think about this.

At any rate, this deal would value AspenTech at $15 billion.

Why buy the rest of AspenTech rather than continue as things are now? Emerson CEO Lal Karsanbhai said, "Since completing our initial investment in 2022, our partnership with AspenTech has ... advanced our capabilities in software-defined control. The strategic and operating success of our partnership with AspenTech over the last two years gives us confidence that the time is right to bring Emerson and AspenTech together. As one company, with shared priorities and investment, we will be even better positioned for growth, margin expansion and shareholder value creation."

The press release, which also detailed other changes Emerson wants to make as it continues to reinvent itself as a technology leader focusing on industrial automation, said that the "combination of Emerson and AspenTech ...

Accelerates Realization of Software-Defined Control: Developments over the last 3 years have proven the value and feasibility of software-defined control. A single integrated organization would benefit Emerson as it designs seamless hardware plus software solutions for its customers.

Enhances Alignment Between Emerson and AspenTech for Additional Synergy Realization: As a single company leveraging the proven Emerson Management System, there will be opportunities for immediate additional cost efficiencies from the transaction. Commercially, the proposed transaction drives greater alignment, collaboration and integration, to allow Emerson and AspenTech to invest, innovate and cross-sell more effectively and drive further sales synergies over time.

Strengthens Combined Automation Software Offering: As a single integrated business, Emerson will have a highly differentiated automation software business globally with software addressing the entire lifecycle of automating complex operations, from design and engineering to production and asset optimization."

See the full press release for more details.

What happens next? Emerson said it delivered its proposal in a letter to AspenTech's Board of Directors but clarified that it "does not create any binding legal obligation between Emerson and AspenTech unless and until mutually acceptable definitive transaction documents are executed." In other words, they need to see how AspenTech and its shareholders feel about this --though it can't really be a surprise to anyone; the price being is the only real uncertainty. If ApenTech's board approves and then a majority of shareholders vote for the deal, then the share purchases would start. No timeline is given in the announcement. Interestingly, given other recent news, regulatory and other approvals were not mentioned. Perhaps because Emerson already owns a majority of AspenTech? Not sure.

My take? Not a surprise at all. The uncertainty unsettled many AspenTech customers, and this should provide some clarity -- though, of course, all the words above about synergies and alignments carry their own baggage, leaving the door open for changes in the long-time engineering products they rely upon.

But of course, another takeaway is that these PLMish technologies are so baked into their customers' processes that they are almost irreplaceable. That makes them an incredibly valuable asset in any portfolio -- and the consolidation continues.