Shares of Aspen Technology (NASDAQ:AZPN) closed Monday’s trading session up 12.3%. Industrial asset management software developer merges with software side of industrial giant Emerson Electric (NYSE: EMR) in a deal valued at around $11 billion.
Emerson is expanding its industrial software businesses – Open Systems International (OSI) and Geological Simulation Software – to merge with AspenTech in a cash-plus-stock transaction. Current Aspen shareholders will receive a cash payment of $87 per share plus 0.42 stubs of the “new AspenTech company”, giving them 45% ownership of the reformed company while Emerson takes a majority stake of 55 %. Emerson will also bring $6 billion in cash to the resulting company’s balance sheet. The deal is subject to the usual series of regulatory and shareholder approvals. The last John Hancock is expected to be in place in the second calendar quarter of 2022.
This business combination makes a lot of sense. The two companies have a long history of interlocking operations, and AspenTech management often discusses Emerson’s close partnership during their quarterly earnings calls. Integrating AspenTech’s asset management tools with Emerson’s automation tools and engineering prowess should allow the new company to tap into a wider market.
AspenTech’s stock is now one rounding error below Emerson’s total bid value. I wouldn’t recommend starting a new position at this time as the stock prices shouldn’t move very far until the deal closes. That being said, you can also consider AspenTech’s frozen price as an attractive hedge against broader market volatility over the next six months.
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