National Instruments Hits a Homerun in $60-per-Share Emerson Deal

We raise our fair value estimate for narrow-moat National Instruments NATI to $60 per share from $48 to reflect an agreement to be acquired by wide-moat Emerson EMR. We assign a 100% probability to the deal closing in our model, as we foresee no regulatory pushback.

We think the $60-per-share deal is a home run for NI shareholders. It represents a 13% premium over the $53-per-share offer from Emerson disclosed in January 2023 and a 40% premium to our prior stand-alone fair value estimate of $43. We had liked the $53 offer for NI and view this agreement as even sweeter. It appears NI’s board and management played their cards right to negotiate a higher price. The offer price values NI at $8.2 billion, and Emerson plans to pay in cash.

We note that rising equity markets may have helped to push up the price, but the 13% raise over the January offer still beats an 8% appreciation for the Nasdaq 100 index over the same period. From NI’s perspective, we believe joining Emerson will give it access to capital to compete with larger test and measurement competitors like wide-moat Keysight Technologies KEYS and private Rohde & Schwarz.

Emerson expects to realize $165 million in cost synergies through five years after closing. For Emerson, adding NI to its portfolio helps it enter a target adjacency in test and measurement, and expands its presence in automation and electric vehicles.

The two firms expect the deal to close in either the fourth quarter of calendar 2023 or the first quarter of calendar 2024. NI will report first-quarter results on April 27, with no management call in light of the pending acquisition.