After being rebuffed by NI’s board for months, the successful acquisition will bolster Emerson’s automation portfolio.
Industrial products giant Emerson says it has finalized a deal to buy and National Instruments (NI) Corp. for a value of $8.2 billion. The company began pursuing NI in May 2022.
“We are pleased to reach an agreement with NI, whose best-in-class test and measurement product and software offerings accelerate Emerson’s progress toward a cohesive, higher growth and higher margin automation portfolio,” said Lal Karsanbhai, President and Chief Executive Officer of Emerson.
NI engineers and manufactures software-connected automated test and measurement systems. It posted $1.66 billion in 2022 revenue and operates in more than 40 countries, serving approximately 35,000 customers across semiconductor and electronics, transportation, and aerospace and defense markets.
“With this expansion into test and measurement, Emerson will enhance its automation capabilities and gain a broader set of customers that relies on NI’s solutions at critical points along the product development cycle,” said Karsanbhai in a release. He said the deal provides Emerson with more access to discrete markets like semiconductor and electronics, transportation and electric vehicles, and aerospace and defense that are poised to benefit from secular growth trends.
“This transaction is a strong testament to the improvements and initiatives we’ve implemented in recent years that have transformed NI into a software focused company with higher growth, better profitability and lower cyclicality,” said Eric Starkloff, NI’s Chief Executive Officer.
Aside from shareholder value, a number of strategic and financial benefits will be realized in this acquisition, including:
Balanced and Diversified End Markets: With an estimated total addressable market of $35 billion, the test and measurement market is fast-growing, highly complementary and a priority for Emerson. In markets like semiconductor and electric vehicle manufacturing, NI expands Emerson’s reach into the design and validation phase of the lifecycle. Overall, NI will increase Emerson’s end market exposure in discrete markets to 18 percent of sales, which will be Emerson’s second largest industry segment.
Complementary Capabilities: NI’s intelligent devices, controls and software complements Emerson’s technology and will accelerate efforts to create a higher value, cohesive industrial technology portfolio. NI’s flexible and modular system-level test solutions have an open and interoperable software platform, a key differentiator. Both Emerson and NI share innovation-focused engineering cultures.
Substantial Synergies: Emerson says it has identified $165 million of cost synergy opportunities by the end of year five through application of best practices from the Emerson Management System. Emerson says it will drive productivity improvements and cut duplication across general and administrative, sales and marketing, and research and development functions, while leveraging Emerson’s scale in manufacturing and supply chain.
Aligned Company Cultures: NI’s innovation and problem-solving focused culture is highly complementary with Emerson’s purpose-driven culture focused on innovation. Employees will have expanded opportunities for career development and advancement.
The transaction has been approved by the Boards of Directors of both Emerson and NI. Under the terms of the agreement, NI shareholders will receive $60 per share in cash, which represents a 49% premium to NI’s closing share price as of January 12, 2023, the day prior to NI’s public announcement of a strategic review. The transaction is expected to close in the first half of Emerson’s fiscal 2024, subject to the completion of customary closing conditions, including regulatory approvals and approval by NI shareholders. Emerson expects to finance the transaction using available cash and liquidity, including approximately $8 billion of post-tax proceeds from the majority sale of Climate Technologies to Blackstone announced in October 2022, which is expected to close in the second calendar quarter of 2023.
Goldman Sachs & Co. LLC and Centerview Partners LLC are serving as financial advisors to Emerson and Davis Polk & Wardwell LLP is serving as legal advisor. BofA Securities is serving as exclusive financial advisor to NI and Wachtell, Lipton, Rosen & Katz is serving a bs legal advisor.
