Dive Brief:
- Industrial conglomerate Emerson Electric Company has begun to contact potential buyers over the sale of its power transmission solutions business, which will be handled by Goldman Sachs and could hit $1 billion or more, sources close to the matter told Reuters.
- The buyer for the power transmission business, valued at approximately ten times its estimated pre-interest, pre-tax, pre-depreciation, pre-amortization earnings of some $120 million, is expected to be another industrial leader or a buyout firm.
- The Emerson divestiture comes quickly after the $25 billion dollar multinational announced plans to consider alternatives for its power transmission unit and it exemplifies many large conglomerates’ efforts to streamline and focus on high growth areas.
Dive Insight:
This Emerson move raises the question of why the U.S., which urgently needs new transmission, is not building much. In a similar sale last year, Sweden's AB SKF, the world's biggest bearings maker, bought U.S.-based Kaydon Corp for $1.25 billion.
Emerson Q3 2014 sales of $6.3 billion and 1.3% gross profit margin increase generated $1.03 per share earnings, up 6% on the previous year. Emerson also reported a record 20% year-to-date increase in its backlog, with its climate technologies unit showing the strongest performance.
The power transmission unit is part of Emerson’s industrial automation business, has over 3,000 employees worldwide, and generated 2013 revenues of $600-plus million.
