Actions of National Instruments Corporation (Born 12.62%) they rose on Tuesday morning, up 13.4% as of 10:32 am ET.
National Instruments – which makes test and measurement software and solutions for engineers in the semiconductor, aerospace and defense, transportation and government sectors – received a buyout offer this morning. Emerson Electric (EMR -6.51%).
While it is not clear if the company agrees to the offer, it is certainly nice to be wanted. Its share price had actually appreciated to a level slightly higher than the general purchase offer at one point this morning, which suggests that investors think that other parties may make a higher counteroffer, or that National Instruments could negotiate a higher price.
Emerson’s offer amounts to $53 per share, which equates to just under $7 billion, or $7.6 billion. enterprise value when incorporating National Instruments’ net debt. The offer is all cash, which means Emerson would have to take on a higher debt load for the transaction.
National Instruments shares have already risen 17% last Friday, after the company disclosed that it was looking for “strategic alternatives”. This is usually code for some sort of purchase or transaction, which is why shareholders are so excited about that announcement.
Today’s disclosed purchase offer of $53 per share equates to a 32% premium over National Instruments’ closing price last Thursday, before Friday’s announcement about strategic alternatives.
Why do shareholders offer the highest share price? Well, it looks like Emerson has been aggressively pursuing National Instruments for months, and the latter has resisted. The reason Emerson is disclosing its latest offer today is due to National Instruments’ announcement last week that it was looking for strategic alternatives.
In this morning’s presentation announcing the offer, Emerson CEO Lal Karsanbhai said:
Even Emerson would have preferred to reach a private agreement, given [National Instruments’] announcement that it has undertaken a strategic review, and after refusing to work with us towards a premium cash transaction in the last eight months, we are doing our public interest for the benefit of all NI shareholders… . The acquisition of NI is another step forward in Emerson’s journey to develop a cohesive, higher-growth, higher-margin portfolio and build on its global automation focus. As Emerson outlined at our recent Investor Conference, we are shifting our portfolio towards higher growth automation markets aligned with secular macro trends, which will deliver significant growth and profitability for years to come.
It’s not hard to see why National Instruments would make an attractive acquisition for Emerson, a larger company focused on automation. National Instruments has shown revenue growth in the teens this year, along with solid profitability. Whether or not Emerson’s offer is enough to satisfy shareholders and the board of directors is another matter.
Today’s price action indicates that the market thinks National Instruments could do better. In view of the 2022 bear market, it is perhaps not surprising that Emerson would seek to take the asset in the pessimism of the market, and it is not surprising that National Instruments may be resistant to a deal until the market general and the economic sentiment improves. Investors interested in both stocks should monitor these developments closely.