"The purchase of Pentair’s (PNR -1.6%) Valves & Controls business adds definitive risk to Emerson’s (EMR -3.8%) earnings over the next several years," says Buckingham Research's Joshua Pokrzywinski, downgrading Emerson to Underperform from Neutral, and cutting the price target to $44 from $49.
“We believe the strategic overlap is less than ideal."
Also downgrading is Credit Suisse, to Neutral from Outperform. The price target remains at $57.
“Investors will be rightly cautious of this pitched ‘strategic deal’ at the wrong time of the cycle,” says Stifel's Robert McCarthy as he maintains his Buy rating. "The perception [will be] that Emerson has caught a falling knife in the same general end market where it struggled for the past two plus years.”
It's a move in line with Emerson's two core verticals, particularly combined with Emerson's planned multibillion-dollar divestitures of Network Power, Leroy-Somer and Control Techniques.
“This acquisition delivers on our strategic plan of investing in Automation Solutions and in markets where we have a global leadership position and see significant long-term growth opportunities,” says CEO David Farr in a statement.
The deal's expected to close in four to six months.
Emerson Electric (EMR +0.2%) has made an offer to acquire pump manufacturer Pentair's (PNR +0.8%) valves and controls business, in a sale could be valued at ~$2B (£1.5B), Reuters reports.
Such a deal would free PNR from a unit that CEO Randy Hogan considers a laggard in generating cash, while allowing EMR to expand within its core sectors as it seeks to shed its network power and motors and drives businesses, according to the report.
Although GE may not make a move right away as it tries to complete the $14B purchase of most of Alstom’s energy business, Bloomberg figures it could amass a $40B war chest for takeovers.
Among speculated targets: Pentair (NYSE:PNR), a provider of water pumps and filtration systems; Flowserve (NYSE:FLS), a maker of industrial pumps and valves; electrical components manufacturer Hubbell (HUB.A, HUB.B); life sciences equipment maker Bio-Rad Laboratories (NYSE:BIO); and some of the assets Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI) will divest as part of their merger.
Whatever the target, acquisitions likely will be part of GE’s transformation after asset sales and returning capital to shareholders.
Jun. 9, 2015, 8:55 PM|26 Comments
Mar. 28, 2012, 6:15 AM
Tyco's (TYC) Flow Control unit will merge with Pentair (PNR) in an all-stock deal that values Tyco Flow at ~$4.9B, including debt. (PR)