Acquisitions and Divestitures

9 Months Ended

Jun. 30, 2014

Business Combinations [Abstract]

Business Combinations Disclosure

In the third quarter of 2013, the Company recorded a noncash goodwill impairment charge in the embedded computing and power business (now Artesyn Embedded Technologies or "Artesyn") of $503 million ($475 million after-tax, $0.65 per share), and a net income tax charge of $33 million ($0.05 per share) related to the anticipated repatriation of non-U.S. earnings from the business and other tax versus book differences. On November 22, 2013, the Company completed the divestiture of a 51 percent controlling interest in Artesyn and received proceeds of $264 million, net of working capital adjustments. The Company retained an interest with a fair value of approximately $60 million, determined using a Level 3 option pricing model. No pretax gain or loss was recognized on completion of the transaction; a tax benefit of $20 million was recognized. Year-to-date consolidated operating results include sales of $146 million for this business through the transaction date. Assets and liabilities held-for-sale as of the closing date were: other current assets, $367 million (accounts receivable, inventories, other); other assets, $212 million (property, plant and equipment, goodwill, other noncurrent assets); and accrued expenses, $255 million (accounts payable and other liabilities). Prior to the divestiture, cash of $376 million ($308 million, after tax provided in fiscal 2013) was repatriated from this business. In fiscal 2013, the Company initiated the repurchase of $600 million of Emerson common stock in anticipation of the sale proceeds and the repatriation of cash. The repurchase was completed in the first quarter of 2014.

In first quarter of 2014, the Company acquired two businesses in the Process Management segment's final control business, Virgo Valves and Controls, LTD, a manufacturer of ball valves and automation systems, and Enardo LLC, a manufacturer of tank and terminal safety equipment. Total cash paid for both businesses was $506 million, net of cash acquired, and the Company assumed $76 million of debt. Combined annualized sales for Virgo and Enardo were over $300 million. Goodwill of $324 million (nondeductible for tax purposes) and identifiable intangible assets of $178 million were recognized from these transactions, primarily customer relationships and patents and technology with weighted-average lives of approximately 12 years. The Company also acquired four other, smaller businesses in 2014 for a total of approximately $104 million, net of cash acquired. Combined annual sales for these four businesses are approximately $55 million.

In second quarter of 2014, the Company acquired the remaining 44.5 percent noncontrolling interest in EGS Electrical Group LLC for $574 million. The transaction reduced noncontrolling interests $101 million and common stockholders equity $343 million, and increased deferred tax assets $130 million. The transaction does not affect consolidated results of operations other than eliminating the noncontrolling interest's share of future earnings and distributions from this business. Sales for this electrical distribution business were more than $500 million in 2013. This business has been renamed Appleton Group and will continue to be reported in the Industrial Automation segment. Full ownership provides growth opportunities in the oil, gas and chemical end markets by leveraging the Company's Process Management and international distribution channels.

In the third quarter of 2014, the Company entered into an agreement to sell its Connectivity Solutions business for $98 million in cash. The transaction was completed in the fourth quarter. Connectivity Solutions, which is reported in the Network Power segment, offers industry-leading fiber optic, radio-frequency and microwave-coaxial technologies that safeguard network reliability and had annual sales of approximately $80 million in 2013.

The Company has also begun evaluating strategic alternatives for its Power Transmission Solutions business unit, which is reported in the Industrial Automation segment. The resulting plans for this business are expected to be announced by the end of the calendar year. The business designs and manufactures market-leading couplings, bearings, conveying components, gearing, drive components, and supporting services and solutions. Sales in 2013 were more than $600 million.