Pavlo Gonchar | Sopa images | Lightrocket | Getty images
Company: ASPEN TECHNOLOGY (AZPN)
Business: Aspen Technology provides industrial software that focuses on customer assistance in the high intensity industries of assets around the world. Its software is used in performance engineering, modeling and design, supply chain management, predictive and normative maintenance, digital network management and industrial data management. The company serves a range of industries with a high intensity of assets, in particular the exploration and production of oil and gas; Treatment and distribution of oil and gas; as well as the refining and marketing of oil and gas.
Market value: $ 16.8 billion ($ 265.25 per share)
Aspen Technology shares the past year
Activist: Elliott Investment Management
Possession: ~ 9.0%
Average cost: n / A
Commentary on the activist: Elliott is a very successful and clever militant investor. The company team includes analysts from the main technological capital -investment companies, engineers, operational partners – former CEOs of technology and coos. When assessing an investment, the company also hires specialized consultants and general management, expert cost analysts and industry specialists. Elliott often looks at companies for many years before investing and has a large stable of impressive candidates from the board of directors. The company has historically focused on strategic activism in the technology sector and has been very successful with this strategy. However, in recent years, its activism group has developed and Elliott has done much more activism oriented towards governance and has created value from a level of advice to a large extent of companies.
What’s going on
On February 7, Elliott announced that he was taken a position of $ 1.5 billion In Aspen technology. The company expressed its disagreement with Aspen’s decision to support a tender offer per share of $ 265 by Emerson Electric, noting that it considerably underestimates the company.
Behind the scenes
Aspen Technology (AZPN) is a global supplier of process optimization software solutions designed to manage and optimize the design of plants and processes, operational performance and supply chain planning. On November 5, 2024Emerson Electric (EMR), which currently holds around 57.4% of the ASPEN actions, has issued a tender offer to acquire all the actions in the circulation of Aspen which are not already held by Emerson at $ 265 per share. To assess this offer, the ASPEN board of directors trained a special committee of three independent and disinterested administrators. In the end, on January 27, 2025It was announced that the committee voted unanimously to recommend the transaction for approval. On February 7Elliott has announced that it is opposed to the tender offer because the company does not think that it values the company fairly.
Emerson acquired a Position of 55% In Aspen in 2022 and until May 2024, an agreement prevented him from acquiring additional shares (it increased to 57% through share buybacks by the company). As an initiated for 2.5 years, Emerson knows Aspen well and could have made this offer at any time since May. As a majority action, Emerson has an informational advantage on the public and the pursuit of a buyout now suggests that he strategically creates his decision. This is in particular a good quarter where the integration of Emerson’s contributed assets from its majority investment in 2022 begins to settle, an improvement in margins seems to be on the horizon, in particular with the Recent suspension of Aspen’s Russia’s activityand the Trump administration seats (Emerson has in fact announced its offer on Voting day) Bring with it a more indulgent regulatory environment for products related to oil and chemicals.
When Emerson publicly announced its tender offer, Aspen Stock was negotiated at around $ 240 per share, making it a 10% buyout bonus that does not approach the significant synergies that Emerson could obtain from this transaction. Although there are operational synergies and sales of at least $ 100 per share, which is the most precious for Emerson is access to the software and the Aspen code, that Emerson can only obtain the whole society. There is a clear precedent for this. In January 2023Schneider Electric closed its acquisition from Aveva, buying the remaining 40% of the company – which happens to be the smallest peer player in Aspen. He offered a bonus of 41% during the non -disrupted action of Aveva before Schneider’s interest was disclosed August 2022. This is more of a standard premium for these types of transactions and complies with $ 100 per share of synergies that Emerson would get here. This suggests a fair price significantly higher than $ 265 per share. By examining all the synergies and benefits of integration, Emerson has in this transaction, a more reasonable take -out price seems to be north of $ 350 per share.
As a majority action, Emerson has a lot of control in this situation. In the absence of an activist investor, this agreement is probably concluded at $ 265. Not only does the price seem scandalous, but the process suggests a romantic agreement. For example, Aspen’s “Special Independent Committee” which approved this agreement was made up of three administrators, two of whom were designated administrators of Emerson on the board of directors. Thus, Emerson actually checked the special committee which was responsible for examining the tender offer. Fortunately, in Delaware, where the company is formed, a tender offer requires at least 50% of shareholders in disinterested circulation to approve the transaction. This means that 21.4% of the remaining shareholders (other than Emerson) must vote for the agreement to adopt. Elliott has 9%, and if all the other shareholders vote (an improbable probability), Elliott would just need 12.4% to block the transaction. If 5% of shareholders do not vote, Elliott would only need an additional 7.4% of the votes. Kayne Anderson is the next largest shareholder with 6.5%, so her vote will be important. It should be noted that it is not clear if Elliott’s position is in ordinary shares or Swaps (a common practice for the company) because its actions here would not oblige to deposit a 13D. However, in this situation, it is not so relevant. If the company was to obtain the voting of 50% of disinterested shareholders, Elliott should have its position in ordinary shares to vote. However, as in this case, the requirement is an offer of 50% of disinterested actions, even if Elliott has Swaps (and assuming that the counterpart does not take a risk of capital), the shares underlying Swaps will not be presented.
One last note – This is not only a situation of “bumpitrage” for Elliott. Although the company would sell in Emerson at a fair price, it has the action because it likes Aspen and thinks that it is a good investment as an autonomous company held 57% by Emerson. If Emerson does not increase its offer, this does not mean that Elliott is offered at a price of $ 265 or at any other price that it finds insufficient. The company would probably be happy to have the stock and benefit from the same operational and macro tail winds as Emerson. In addition, the company has just received a strong call for profits, but the action has not exceeded $ 265 in the news, because the price of the offer establishes a little artificial ceiling. So, this is a situation where if Emerson improves its offer, the stock will increase. If the offer disappears, the artificial ceiling does it too and the course of action could also increase in this situation.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholders’ activism, and the founder and portfolio manager of the Activist Fund 13D, a common investment fund that invests in a 13D activist investment portfolio.