Global electrical and process automation giant Emerson Electric Co., St. Louis, has agreed to acquire SPX Corp.’s 44.5% minority interest in EGS Electric Group LLC, giving Emerson full ownership of the business. EGS, which is home to a large handful of storied brands in the electrical industry, had estimated revenues of more than $500 million in fiscal 2013.
Emerson purchased SPX’s share for $571 million. SPX will net $350 million from the deal after taxes, which it planned to use for share repurchases and reducing debt, SPX CEO Chris Kearney said in the SPX statement on the deal.
Emerson and SPX, which is based in Charlotte, N.C., have jointly held the business since 1997, with Emerson responsible for operational management and consolidation of results in its Industrial Automation segment. Under that joint ownership, EGS has grown organically and by acquisition to cover a range of electrical products including fittings, hazardous location lighting, power conditioning and other categories. Among the electrical manufacturing companies acquired by EGS over the years are well-known names such as Appleton, O-Z/Gedney, Curlee, Sola/Hevi-Duty, Easy-Heat, Neer, Nelson Enclosures, ETP, McGill and others.
Emerson’s release announcing the deal highlighted the reputation EGS Electric’s businesses have established for durability, safety and quality, and suggested the company’s role in the oil and petrochemical markets is an important part of Emerson’s plans. “Although EGS serves a wide range of markets, its oil, gas and chemical participation has grown to more than half of total sales,” the release said.
“Historically, EGS has been a high-quality, niche market participant, with sales concentrated in North America,” said David Farr, chairman and CEO of Emerson. “As oil, gas and chemical market opportunities have developed, the potential for growth by leveraging Emerson’s strong Process Management and international channels has become increasingly attractive, and can be best achieved under full Emerson ownership.”
The transaction is expected to close within two months, subject to regulatory approvals. EGS sales and earnings will continue to be consolidated in Emerson’s Industrial Automation segment results.
“We are excited for EGS to become a wholly-owned business of Emerson,” Farr said. “Emerging opportunities with our Process Management and Industrial Automation businesses make this the right time to assume full ownership and realize the synergies possible as a fully integrated business of Emerson. We are grateful for the strong partnership with SPX over the years.”
SPX CEO Kearney described the move to sell its stake in EGS as consistent with the company’s strategy to narrow its focus to process and flow components and systems. SPX produces sales of about $5 billion annually and has a worldwide workforce of 14,000 people. It continues to make medium and large electrical transformers for the utility market, including a production facility in Waukesha, Wis., that it expanded in 2012.
Emerson, with annual revenues of $24.7 billion in 2013, has 135,000 employees and 235 manufacturing facilities worldwide. Its businesses are divided into Process Management, Industrial Automation, Network Power, Climate Technologies and Commercial & Residential Solutions.