(Bloomberg) — Emerson Electric Co. is in talks over a combination with Aspen Technology Inc. to create an industrial software giant, according to people with knowledge of the matter.
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Emerson is discussing a deal to merge its software assets with Aspen Tech and gain majority control of the combined entity for its shareholders, the people said, asking not to be identified because talks are private.
Aspen Tech, which has a market value of about $8.4 billion, would keep its own public listing, they said. Its management is planning to stay on after the transaction and run the combined software entity, one of the people said.
No final decisions have been made and talks may fall apart, the people said. A representative for Emerson declined to comment. Aspen Tech didn’t immediately respond to a request for comment.
St. Louis-based Emerson rose as much as 3.5% after the close of regular trading, while Aspen Tech, based in Bedford, Massachusetts, climbed as much as 8%.
The deal would be Emerson’s latest in the software space, as it seeks to help customers use technology to monitor and digitize their operations. Last year, it agreed to buy Open Systems International for $1.6 billion. Emerson’s shares are up 19% this year for a market valuation of $57 billion.
Break-Up Opportunity
A combination of Emerson’s software assets with Aspen Tech could create an opportunity to pursue the break-up of its automation and commercial and residential units, according to a report from Joel Levington of Bloomberg Intelligence.
Aspen Tech makes software for companies in industries such as chemicals, manufacturing, energy, metals and mining. It has previously considered a range of options, including a sale of all or part of the company.
The company has long been considered an attractive partner for big industrial companies looking to expand in software. Industrial firms have been shifting their focus from machinery to technology and automation in recent years.
Aveva Group Plc earlier this year completed the acquisition of SoftBank Group Corp.-backed industrial software maker Osisoft for about $5 billion.
Emerson has shown appetite for big deals previously, though not all of them worked out. The company in 2017 withdrew its $29 billion proposal to acquire Rockwell Automation Inc. after the target rejected the overtures.
Instead, Emerson forged ahead with smaller purchases and disposals alongside internal investments.
(Adds analyst comment on break-up opportunity for Emerson.)
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