UPDATE 3-SPX Corp to sell JV stake to Emerson Electric for $571 mln

Wed Dec 4, 2013 5:58pm EST

* Deal value includes taxes worth $220 mln

* Expects sale to close in first quarter 2014

* SPX expects to record gain of $6.50/share in first quarter

Dec 4 (Reuters) - SPX Corp, which has been under pressure from its largest shareholder to boost its stock price, said it would sell its entire stake in an electrical equipment joint venture to partner Emerson Electric Co for $571 million.

SPX has been buying and selling businesses to focus on its flow technology division, joining other diversified U.S. industrials that have slimmed down their businesses after the economic crisis of 2008-2010.

Ingersoll-Rand Plc has spun off its security business, while Timken Co is hiving off its steel division.

Activist fund Relational Investors, which has a 15.5 percent stake in SPX, urged the company in February to consider strategic alternatives to boost its stock price.

"I can't say that (the sale of SPX's stake in the joint venture) is entirely a function of Relational's involvement but one would believe that their advise has been followed," Wedbush Securities Inc analyst David Rose said.

Relational also opposed SPX's $4.2 billion offer for rival Gardner Denver Inc last year, saying the bid would endanger the company's stated goal of paring down to focus on flow technology.

Private equity firm KKR & Co LP eventually took the industrial machinery maker private.

SPX has been investing in its flow technology business due to high demand for engineered pumps, valves, mixers and filtration technologies that are used to generate power and to process oil and gas.

The business had sales of $2.68 billion in 2012, just over half of the company's total revenue.

DEAL DETAILS

SPX, which also makes equipment to produce food and beverages, transformers and cooling towers for power plants, said on Wednesday it expects the sale of its 44.5 percent stake in EGS Electric to close in the first quarter of 2014.

The company said the deal value includes taxes worth about $220 million. The company expects to record an after-tax gain of about $300 million, or $6.50 per share, in its first quarter ending March 30.

SPX said it would use a part of the proceeds to buy back shares and to reduce its debt.

The joint venture, EGS Electric Group LLC, was set up in 1997, with Emerson responsible for operational management.

EGS Electric, which makes electrical fittings, hazardous location lighting and power conditioning equipment, had revenue of more than $500 million in 2013. It operates primarily in the United States, Brazil, Canada and France.

St. Louis-based Emerson said sales from EGS Electric would be consolidated in its industrial automation segment and would add to earnings in 2014.

Shares in SPX, which has a market value of about $4 billion, rose as much as 2 percent in morning trading but gave back almost all those gains and ended only slightly higher on the day. The stock has risen 18 percent since Relational disclosed an 8.8 percent stake on Feb. 25.

Barclays was the financial adviser to Emerson on the transaction.

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