Emerson Merging Software Business with AspenTech in $11 Billion Deal
Emerson Electric Co. said it will merge its software business with rival Aspen Technology (AspenTech) in an $11 billion deal that will bring together both companies’ expertise in industrial software applications. It’s the latest move by Emerson to support the rapid growth of digitization in the power generation industry.
“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,” Emerson CEO Lal Karsanbhai said in a statement Oct. 11. AspenTech shareholders will receive $87 a share in cash and 0.42 share of stock in the new company, the companies said Monday. Emerson will contribute $6 billion of cash to the new venture, taking a 55% stake.
“Our customers are increasingly seeking partners to help realize stronger performance as they automate workflows in their facilities to optimize operations,” said Karsanbhai. “New AspenTech will become an engine for both acquisition and organic growth.”
Emerson, a technology and engineering company based in Ferguson, Missouri, continues its efforts to become an industrial software supplier. The company in the power sector is working on projects to optimize plant output, and support modernization of the U.S. power grid. Emerson last year agreed to pay $1.6 billion for Open Systems International (OSI), an operations technology software provider serving the global power industry. The deal announced today will incorporate the OSI technology, which is designed to support digital operations to more seamlessly incorporate renewable energy resources to the power grid, and improve energy efficiency and reliability.
New Company Will Keep AspenTech Name
AspenTech, based in Bedford, Massachusetts, makes software for companies across industries such as energy, chemicals, manufacturing, and metals and mining. The company reportedly had been considering a sale of all or part of itself. The new company will keep the AspenTech name, along with its Massachusetts headquarters, and will be led by current AspenTech CEO Antonio Pietri.
“Today’s announcement marks an exciting new era,” Pietri said Monday. “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. 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 on Monday said they expect the new company will realize efficiencies of about $16 a share, or nearly $1.1 billion, through cost savings and by leveraging Emerson’s $120 billion installed base of equipment, along with its sales force of 12,000 people.
Emerson reported fiscal 2020 sales of $16.8 billion. AspenTech had $790.4 million in revenue in fiscal 2021, up 18.4% from a year earlier, and employs about 1,900 people. The new company is expected to have about 3,700 workers.
Support for T&D Initiatives
The companies in a news release said 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.”
The companies also noted that the addition of the OSI capabilities “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.”
The companies noted that the 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.”
—Darrell Proctor is a senior associate editor for POWER (@POWERmagazine).