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Emerson Acquires CIRCOR's Spence and Nicholson Product Lines

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Emerson Electric Co. (EMR - Free Report) , on Sep 3, announced that it has completed the acquisition of CIRCOR International, Inc.’s Spence and Nicholson product lines. Notably, the value of the transaction, which closed on Aug 30, 2019, is worth about $84.5 million in cash. The buyout will enable Emerson to strengthen its portfolio of steam system solutions for commercial buildings and process industries.

Spence and Nicholson’s portfolio consists of market leading products like control valves, steam regulators, safety relief valves, temperature regulators, steam accessories and solutions, among others.

Following the announcement, the company’ share price increased 1% to eventually close at $59.61 on Wednesday.

Acquisition Rationale

The acquisition complements Emerson’s buyout of Pentair Valves & Controls — a business unit of Pentair plc (PNR - Free Report) — in April 2017. The buyout allowed Emerson to fortify its automation portfolio and offer complete valve solutions portfolio and sturdy service network.

As noted by Emerson, the addition of CIRCOR’s steam technologies and advanced product lines to its Final Control business will enable the company to aid customers in optimizing their operational performance and boost energy efficiencies. As a matter of fact, with the expanded product offerings in the steam segment, the company will serve a stronger customer base that includes universities, hospitals, commercial operations and the transportation industry.

Our Take

Emerson’s ardent eye for acquisitions is anticipated to be conducive to core business. Notably, acquired assets boosted its sales by 6% and 5% in the second quarter (ended Mar 31, 2019) and third quarter of fiscal 2019 (ended Jun 30, 2019), respectively. As noted, during the first nine months of fiscal 2019 (ended Jun 30, 2019), it added seven buyout assets to the Automation Solutions segment, including the Intelligent Platforms business of General Electric Company (GE - Free Report) . As a matter of fact, for fiscal 2019 (ending Sep 30 2019), the company expects acquired assets to boost sales by 5%.

Also, Emerson is well positioned to benefit from its diverse portfolio of products, and its dominant position in key markets tied to energy efficiency and infrastructure spending. The company’s focus on rewarding shareholders handsomely through dividends and share repurchases will work in its favor.

However, the company is experiencing persistent weakness in the global discrete manufacturing market due to soft automotive and semiconductor end markets. As a matter of fact, Emerson expects the weakness to persist in the global discrete manufacturing market in the near term.

 

The Zacks Rank #3 (Hold) company has lost 4.9% in the past three months compared with the industry’s decline of 3.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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