Acquisitions and Divestitures

9 Months Ended

Jun. 30, 2015

Acquisitions And Divestitures [Abstract]

Business Combinations Disclosure

On June 30, 2015, the Company announced plans to spin off its Network Power business via a tax-free distribution to shareholders as part of a strategic plan to streamline its portfolio, drive growth, and accelerate value creation for shareholders. The Company will also explore strategic alternatives, including potential sale, for its motors and drives, power generation and remaining storage businesses. These businesses represent approximately 30 percent of consolidated 2014 sales and 20 percent of earnings and cash flow. When complete, these transactions are expected to result in a smaller and more focused Company, with leadership positions in higher-growth end markets that provide significant opportunities for enhanced growth and improved profitability. In addition, the Company will conduct a complete review and assessment of its corporate services and structure to bring them into alignment with its smaller scale and sharper focus. The separation of Network Power will create two independent publicly-traded companies, both owned by Emerson stockholders, and is subject to certain conditions, including final approval by Emerson’s Board of Directors, receipt of favorable opinions regarding the tax-free status of the transaction for federal income tax purposes, and review and approval of the Form 10 that will be filed with the SEC. The various transactions are expected to be substantially completed by September 30, 2016. With regard to the evaluation of strategic alternatives for the other businesses, there can be no assurance that the review process will result in any transaction. The Company expects to incur significant costs to implement these transactions, including income taxes related to reorganizing the ownership structure of these businesses, investment banking, legal, consulting and other costs.

The Company is evaluating strategic alternatives for its InterMetro storage business, including a potential sale. InterMetro is a leading manufacturer and supplier of storage and transport products in the food service, commercial products and healthcare industries. This business had annual sales of $284 million and pretax earnings of $36 million in 2014, and is reported in the Commercial & Residential Solutions segment. The Company has received nonbinding indications of interest from certain third parties, and expects to receive final offers in August and make a decision and announce plans for this business by year end.

On January 30, 2015, the Company completed the previously announced sale of its mechanical power transmission solutions business to Regal Beloit Corporation for $1.4 billion. The Company recognized a pretax gain from the transaction of $932 million ($528 million after-tax, $0.77 per share). Assets and liabilities held-for-sale at the closing date were as follows: other current assets, $181 million (accounts receivable, inventories, other); other assets, $375 million (property, plant and equipment, goodwill, other noncurrent assets); accrued expenses, $51 million (accounts payable, other current liabilities); and other liabilities, $41 million. After-tax proceeds of approximately $1 billion were used for share repurchase. This business was previously reported in the Industrial Automation segment and had fiscal 2014 sales of $605 million and earnings before income taxes of $87 million. Power transmission solutions designs and manufactures market-leading couplings, bearings, conveying components and gearing and drive components, and provides supporting services and solutions.

During 2015, the Company completed six acquisitions with combined annualized sales of approximately $70 million in Process Management's final control, measurement devices and systems and solutions businesses. Total cash paid for all businesses was $250 million, net of cash acquired. The Company recognized goodwill of $149 million ($42 million of which is expected to be tax deductible) and other intangible assets of $100 million, primarily customer relationships and intellectual property with a weighted-average life of approximately 9 years.

In the first quarter of 2014, the Company completed the divestiture of a 51 percent controlling interest in Artesyn and in the fourth quarter of 2014, the Company sold its connectivity solutions business. Both of these businesses had been previously reported in the Network Power segment. Consolidated operating results for the nine months ended June 30, 2014 included combined sales of $203 million and a pretax loss of $7 million (net loss, $6 million) for these businesses.