Stock of the industrial conglomerate
moves after reports that the hedge fund D.E. Shaw has taken a stake in the company and is pushing for change.
Details are thin, but this seems like another situation where an activist tries to unlock value by dividing a large company into smaller pieces. Neither Emerson nor Shaw immediately responded to a request for comment.
Emerson (ticker: EMR) is big for an industrial company, with a market value of $ 40 billion. It reports results for two business areas: automation solutions and commercial and residential solutions.
The automation business creates hardware and software that controls industrial processes. Emerson was trying to bulk up in that area when it offered to buy
(ROK) in 2017, although the agreement fell through.
Emerson & # 39; s commercial and private segment produces climate control equipment as well as tools, such as the rigid brand, which consumers may be familiar with.
Industrial conglomerates have been diminishing for years.
(UTX) breaks into three parts, supported by transformational activist investor Dan Loeb. (He's less sincere about United Tech's plan to team up
(RTN) after the breakup is complete.)
DowDuPont split into three companies. And
(HON) also pared down its portfolio of businesses, making a series of smaller divestitures. It spun out
(GTX) in recent years.
There are other examples too.
(IR) has spun off and merged businesses.
(PNR) has done the same.
This is an era of management focus for industrial companies. It seems no one wants to be a sprawling conglomerate anymore. Shaw can push for Emerson to follow a similar path.
Investors are likely to be OK with Emerson's management, based on the company's stock performance. Over the past three years, Emerson shares have returned 11%, roughly the same annual average as other industrial components in the company
This does not appear to be a case where activists will push for change in the executive suite. This means that Shaw is likely to take a collaborative perspective with management to implement the changes it suggests.
Emerson shares rose $ 1.50, or 2.3%, to $ 65.69 in Friday trading, better than the 0.6% decline in
Dow Jones industrial average.
Write to Al Root at email@example.com