Emerson Electric Merges Its Software Business With AspenTech in $11B Deal

In a deal aimed at creating a new AspenTech offering “a highly differentiated industrial software portfolio,” the assets of Emerson and AspenTech are set to be combined to advance their software offerings to the mining, manufacturing and pharmaceutical industries.

Multinational technology and engineering company Emerson Electric Co. (NYSE: EMR) is set to merge two of its software businesses with asset optimization software company Aspen Technology, Inc. (Nasdaq: AZPN) in an $11 billion deal announced on October 11.

Specifically, Emerson will merge OSI Inc. and its Geological Simulation Software business with AspenTech to create a new AspenTech that has a diversified software portfolio “with greater scale, capabilities and technologies.”

Pursuant to the deal, Emerson will give $6 billion in cash to the new AspenTech, which will go to AspenTech shareholders. As a result, Emerson will have a 55% stake in the new AspenTech. The deal will fast-track Emerson’s software investment strategy as it builds out its portfolio with the new AspenTech that is scalable and relevant in the market.

AspenTech shareholders will receive around $87 per share in cash and 0.42 shares of the new AspenTech for each share of the original AspenTech, the equivalent of $160 per share. Shareholders will also have the remaining 45% stake in the new company.

Furthermore, the deal will allow the new AspenTech to have a portfolio across the full asset lifecycle and expand into high growth markets with its blue-chip customer base. This comes on the heels of AspenTech’s announcement that it would invest $35 million in life sciences, metals and mining, which will help accelerate use of new AspenTech products. OSI will allow the new entity to “develop its transmission and distribution offering to support power grid modernization and ensure grid reliability,” which will grow Emerson’s global life sciences expertise.

The new AspenTech will remain headquartered in Bedford, Massachusetts and the current CEO of AspenTech will be the CEO of the new company. There will be nine members of the board for the new company, of which five will be chosen by Emerson. The current chair of the board of AspenTech, Jill Smith, will be the chair of the board of directors for the new entity.

The deal, which was unanimously approved by Emerson’s board and AspenTech directors present. The transaction is expected to close in Q2 2022, pending AspenTech shareholder and regulatory approval, among other customary closing conditions. The new entity will also be traded under AZPN on NASDAQ.

Before the announcement on October 8, Emerson’s stock was valued at $96.64 and AspenTech’s stock was valued at $141.55. More than a week after the deal, after the market settled from the announcement, stock prices we $97.27 and $161.09 for Emerson and AspenTech, respectively on October 20.

Emerson is represented by Davis Polk & Wardwell LLP and its financial advisors are Goldman Sachs & Co. LLC and Centerview Partners LLC.

AspenTech is represented by Skadden, Arps, Slate, Meagher & Flom LLP and its financial advisor is JP Morgan Securities LLC.

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