Emerson to Divest Businesses - Analyst Blog

Emerson Electric Company (EMR) entered into an agreement with Tokyo-based Nidec Corporation (Nidec) to sell its Motors and Appliance Controls businesses.  These businesses include two of Emerson’s Motor Company, Emerson’s Commercial and Industrial Motors (“CIM”) and Emerson Appliance Motors and Controls (“EAMC”).
 
The decision to sell the Motors and Controls business was made by Emerson after six months of assessment of potential businesses that can be divested. The company was in search of a buyer who can handle its businesses efficiently. The company states that the acquisition proposal from Nidec provides great value for its customers, employees and shareholders.
 
Nidec will operate these Motor Company businesses from Emerson’s existing Motor Technology Centre and will retain the existing management and employees of the acquired business, as this will strengthen its motor and motor-related business worldwide, especially in the U.S./North America. Emerson Appliance Motors and Controls is the largest supplier of appliance motors in the U.S. and Emerson’s CIM is a leading manufacturer of industrial motors. The two Motor Company businesses made a combined sale of above $800 million in fiscal 2009.
 
Within the motor and control businesses, Emerson will, however, continue to operate its hermetic motors business, which aids its Climate Technologies’ Copeland Scroll compressors. The company will also continue to operate its motor business in Europe (Leroy-Somer) and its U.S. based Ceiling Fan making business, Emerson Air Comfort Products.
 
Emerson continues to invest in breakthrough technologies, expand its geographic presence and improve the cost structure of the business, both organically and through acquisitions. We anticipate that the emerging markets will continue to outperform mature markets and would represent a significant portion of the company’s total sales. Furthermore, the emerging markets are expected to recover faster compared with the U.S. and Europe.
 
Based in St. Louis, Missouri, Emerson Electric Co. is a diversified global manufacturing and technology company.  It offers a wide range of products and services in the areas of process management, climate technologies, network power, storage solutions, professional tools, appliance solutions, motor technologies, and industrial automation. Major competitors of Emerson are ABB Ltd. (ABB), General Electric Co. (GE) and Hitachi Ltd. (HIT).
 
We currently maintain our Neutral recommendation on Emerson Electric Co, with a Zacks #3 Rank ('Hold' recommendation) over the next one-to-three months.
 
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