Emerson (NYSE: EMR) announced that it submitted a proposal to the Board of Directors of National Instruments (“NI”) to acquire NI for $53 per share in cash at an implied enterprise value of $7.6 billion.
The proposal, which is not subject to any financing conditions, was submitted to NI on November 3, 2022, and represents an improvement over an initial $48 per share proposal submitted on May 25, 2022. Emerson has made numerous attempts to engage constructively with NI in private since May 16, 2022, as outlined in the correspondence below. Full details, including Emerson’s previous correspondence with NI, are available at www.MaximizingValueAtNI.com.
The proposal represents:
- Immediate and certain cash value for all NI shareholders;
- A 32% premium to NI’s closing share price as of January 12, 2023, the day prior to NI’s public announcement of a strategic review on January 13, 2023;
- A 45% premium to NI’s closing share price as of November 3, 2022, the day Emerson submitted its latest proposal to acquire NI;
- A 38% premium to the volume weighted average price for the last 30 trading days ending January 12, 2023; and
- A 23% premium to NI’s 52-week high intra-day share price of $43.12, as of January 12, 2023.
“Although Emerson would have preferred to reach an agreement privately, given NI’s announcement that it is undertaking a strategic review, and after refusing to work with us toward a premium cash transaction over the past eight months, we are making our interest public for the benefit of all NI shareholders,” said Lal Karsanbhai, President and Chief Executive Officer of Emerson.
“Acquiring NI is another step forward in Emerson’s journey to develop a cohesive, higher growth and higher margin portfolio and build on its global automation focus. As Emerson outlined at our recent Investor Conference, we are transforming our portfolio toward higher-growth automation markets aligned with secular macro trends, which will deliver significant growth and profitability for years to come.”
Mr. Karsanbhai continued, “We have long admired NI and believe that combining its best-in-class electronic test and measurement product and software offerings with Emerson’s automation technology and software would enhance our ability to bring comprehensive solutions to a diverse set of end markets, accelerating growth and positioning Emerson to create significant shareholder value. We stand ready to work immediately with NI’s Board and management team to reach an agreement that would provide a compelling premium and certain cash value for all NI shareholders.”
Combination Would Advance Emerson’s Global Automation Focus
The proposed transaction continues Emerson’s transformation into a global automation company. Benefits of the transaction include:
- Aligned with Emerson’s Portfolio Transformation Into a Cohesive, Higher Growth, and More Profitable Company: Emerson is actively transforming its portfolio to create a higher value, cohesive industrial technology portfolio serving a diversified set of end markets. With NI, Emerson would gain a strong, complementary portfolio of differentiated electronic test and measurement offerings, and a technology stack of intelligent devices, controls and software that complements Emerson’s technology stack in its core automation markets. As outlined at Emerson’s November 29, 2022 Investor Conference, test and measurement is one of Emerson’s four priority segments.
- Further Diversification of End Markets: With favorable long-term trends and an estimated priority target TAM of $35 billion, test and measurement is a fast-growing and complementary adjacency to Emerson’s portfolio. This acquisition would enable Emerson to further expand and diversify its customer base within highly attractive end markets with strong secular trends including semiconductor, automotive and electric vehicles, and aerospace and defense.
- Significant Financial Benefits: The transaction is expected to be accretive to Emerson’s adjusted EPS in the first year, meets Emerson’s communicated returns threshold and will improve Emerson’s overall growth. NI has an attractive financial profile, with approximately 70% gross margins. NI’s business has strong positions in attractive and growing markets, creating sustainable top line growth potential. Emerson sees significant potential for profit and cash flow improvement across the NI business by applying proven operational excellence and productivity levers through Emerson’s Management System.
- Emerson’s Strong Commitment to the Transaction: Emerson believes its premium proposal will bring clear and realizable value to NI shareholders, who have faced years of share price underperformance across nearly any period. Underscoring its commitment to consummating a transaction, Emerson has purchased 2.3 million shares of NI stock and has received approval under HSR1 to increase its stake. Emerson believes that there is a path to a friendly transaction and urges NI shareholders to make their views known to NI’s management and Board. Furthermore, Emerson is prepared to nominate directors for election to NI’s Board.
Emerson’s Public Proposal Follows Eight Months of Delay and Lack of Engagement
Emerson’s first outreach to NI regarding a potential all-cash acquisition was on May 16, 2022, and Emerson’s initial $48 per share proposal was formalized in a letter on May 25, 2022. For eight months, NI delayed and refused to engage meaningfully with Emerson, as outlined in the correspondence below. In addition, after receiving the initial May 25, 2022 proposal from Emerson, NI not only refused to engage with Emerson – it repurchased more than 2 million shares at an average weighted price of $40.25, the largest quarterly repurchase in its history on a dollar basis, depriving its shareholders of the opportunity to realize immediate cash value through the transaction price, which is significantly above the repurchase price.
In a November 3, 2022 letter, Emerson outlined the terms of an improved all-cash proposal of $53 per share and highlighted its numerous attempts to engage with NI to that date. On November 15, 2022, NI responded to Emerson, indicating that it had created a working of its Board to examine Emerson’s proposal in greater detail, as well as evaluate options with the assistance of advisors.
In the more than two months since, NI continued to resist engaging meaningfully with Emerson to work toward an agreement. Eight months after Emerson’s approach, NI agreed to a January 4, 2023 meeting with representatives from Emerson, which was followed by one additional conference call. During these discussions, NI shared very limited, high-level information about its business and continued to demonstrate its unwillingness to provide more detailed information, including refusing to respond to key diligence questions provided ahead of the meeting. NI then informed Emerson that this would be the extent of its engagement. In a letter dated January 11, 2023, Emerson reiterated its $53 per share proposal to acquire NI.
NI Shareholders: Stop Your Board’s Delay Tactics
Emerson is disappointed that NI chose to announce a strategic review and put in place a poison pill on January 13, 2023, rather than engaging privately and constructively. NI did not respond to Emerson’s latest letter sent on January 11 before its public announcement.
NI’s strategic review announcement comes more than two months after the NI Board purportedly formed a working to evaluate options with its advisors – with no results.
NI shareholders should understand that for eight months they have been deprived of the opportunity to realize certain cash value at a significant premium. Emerson urges NI shareholders to engage with their Board to ensure this public strategic review process is not merely another delay tactic.
Emerson has organized the resources to work expeditiously toward a transaction with NI, has shared a merger agreement with NI, and is prepared to transact promptly. Emerson has performed due diligence with publicly available information and would have only limited and specific confirmatory due diligence requirements. Additionally, Emerson does not anticipate any significant regulatory risks or delays given the complementary nature of the two businesses. Finally, the Emerson proposal is not subject to any financing conditions.
Emerson feels compelled to disclose the contents of all its correspondence with NI, beginning in May 2022, to make public its consistent and sustained track record of attempted engagement with NI, without any meaningful or constructive response. This correspondence is below and is also available at www.MaximizingValueAtNI.com.