Blackstone braves freezing debt financing market with $14 billion Emerson unit deal

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Blackstone has agreed to buy a majority stake in Emerson Electric’s climate tech business in a deal that values ​​the industrial conglomerate’s unit at $14 billion and came at a time when funding by loan had largely seized up.

The US private equity group, alongside sovereign wealth funds Abu Dhabi Investment Authority and Singapore’s GIC, will buy a 55% stake in the unit, which should help accelerate the firm’s efforts to streamline its operations .

Emerson, founded in St Louis, Missouri, in the 1890s, sells business lines to strategic buyers and private equity firms as part of broader corporate restructuring. He will receive $9.5 billion in cash from the sale – including $4.4 billion in black stone and the rest from debt funding sources – which Chief Executive Lal Karsanbhai said would be used to invest in growth projects.

The company will retain a 45% stake in the business and is providing $2.25 billion in vendor financing which will eventually be repaid.

The deal would be structured as a joint venture between the two companies until its potential sale or IPO, the groups said in a statement. Emerson will also sell the property of its St Louis headquarters to the joint venture for an undisclosed price and enter into a three-year lease as part of the search for a new headquarters.

Emerson’s climate technology unit sells refrigeration units, products used in heating and air conditioning systems, and tools that supermarkets use to monitor and manage their lighting and refrigeration systems.

Over the past 18 months, Emerson has sold “non-core” businesses, including garbage disposal machines and temperature sensors as it seeks to reinvest in its most important business of selling automation machinery to the automotive, energy and industrial sectors, among others.

black stone, which arranged the debt financing package, believes the deal underscores its financial clout at a time of great market dislocation. To do this, Blackstone worked with sovereign wealth funds, which were two of the company’s most important clients, while arranging a complex financial package.

“This is a landmark transaction for our private equity business and demonstrates our ability to provide solutions to our partners even in challenging economic and market environments,” said Joe Baratta, Head of Business. private equity firm from Blackstone.

Since the spring, banks have been less willing to provide debt financing for large leveraged buyouts, having had trouble selling on the debt they agreed to provide for several of these deals earlier this year.

Tighter financial conditions interest rates are rising and the economic outlook became uncertain slowed the progress of many large corporate restructurings undertaken by conglomerates such as Emerson and cooled private equity interest in major corporate spin-offs.

Yet private equity groups are still showing keen interest in pursuing these deals by tapping into increasingly powerful sources of private capital, such as large sovereign co-investors and private lenders, to see them through. .

Blackstone has already placed more than $5 billion in debt for the acquisition. A revolving credit facility and a term loan covering a portion of the debt are led by RBC Capital Markets, Wells Fargo and SMBC. A consortium of private lenders including Sixth Street, Goldman Sachs Asset Management and Apollo Global are participating in a private term loan, according to people familiar with the matter.


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