After a protracted hostile takeover offer, club holding firm Emerson Electric (EMR) eventually reached an agreement to purchase National Instruments (NATI) on Wednesday, paying more than we anticipated. It was disappointing that Emerson paid almost $60 for each NATI share when the engineering and automation giant had said it would only pay in the low to mid $50s. The actual price paid was $59.61 per share (because EMR already owned 2.3 million NATI shares, or 2% of the existing shares).
Despite rising more than 10% after the transaction news, to an all-time high, National Instruments was still trading a few dollars below the purchase price. Emerson stock declined in price. Emerson’s management stated during a conference call with investors on Wednesday that the deal will”Incorporate a high-growth automation component with exposure to significant discrete end markets, including semiconductors, electronics, electric vehicles, aerospace, and defense.”
The National Instruments technology portfolio “stands poised to capitalize on the same secular trends as our core business today,” the Emerson team continued. Emerson had long sought a partnership with National Instruments and was in a solid position after a successful 2022 despite the challenging market in 2018. On January 6, EMR shares reached a 52-week high of about $100 per share. However, after the business announced its hostile bid of $53 per NATI share, less than two weeks later, EMR plunged off a cliff.
Since then, it has suffered as Wall Street and investors like us have argued over (and continue to argue over) the price of EMR 1Y Mountain Performance of Emerson Electric for One Year Since the club’s founding in December, we have purchased a number of EMRs. Even if we dislike hostile offers, it turns out that Emerson would accept a deal or no deal as long as they don’t overpay. Finally, CEO Lal Karsanbhai was questioned about whether Emerson would “hit the wall” and pay for the transaction if National Instruments wouldn’t accept less than $60 per share during the company’s first-quarter earnings call in February.
In response, Karsanbhai said, “I can tell you that very clearly, then we will not be the buyer of the asset.” We accepted him at his word. The most astonishing aspect of the news is this, in my opinion. The market was informed by management that they would be disciplined but still rose in price. While the deal is expected to be immediately profitable on an adjusted earnings per share (EPS) basis at $60 per share (which means EPS estimates will be raised slightly upon closing), it is quickly possible Saying one thing and doing the other takes your stock down. But to be clear, the problem isn’t that National Instruments is a bad company and this deal was doomed from the start.