Industrial goods maker Emerson Electric (NYS: EMR) seems to have shifted its focus on its climate technologies division, the performance of which hasn't been too inspiring over the past few months. The company is buying Johnson Controls' (NYS: JCI) marine container and boiler business in a bid to boost its climate-based prospects. Johnson's equipment is currently installed on as many as 650,000 marine containers.
A cool deal
The acquisition of the marine container and boiler business will enable Emerson to supply software and equipment to shipping companies. These companies will, in turn, use the equipment to control the temperature inside refrigerated containers as they are carried through port terminals to oceangoing ships. This protects the food and other perishable items stored in the ships.
Emerson already provides refrigeration and cooling solutions to residential and commercial markets. With the acquisition of this unit, the company will now be able to cater to the heating and cooling demands of marine customers as well, largely improving its client base in the process.
Sales of climate technology goods accounted for 16% of Emerson's total revenue in 2011. In the quarter ended December 2011, the company witnessed a steep 9.5% decline in sales of its climate technologies division. This was caused by a sluggish housing and commercial construction market in both the U.S. and China that resulted in inventory destocking by vendors, which again hurt the sales of Emerson's heating and cooling products.
But even in the quarter ended September last year, the climate technologies division continued to remain a source of concern for Emerson, as it was the only segment which recorded zero growth in revenue.
The Foolish takeaway
According to Emerson Electric CEO David Farr, the company will shell out less than $100 million to buy the marine container and boiler business, which currently generates $50 million worth of revenue annually. Although the amount seems to be a small one initially, the move is likely to help push the growth of Emerson's climate control segment.
Of course, it remains to be seen exactly how much this acquisition will contribute to the company's bottom line. I would certainly keep a close watch on Emerson's upcoming quarterly figures. Click here to add Emerson Electric to your free stock-tracking watchlist and stay updated on this stock.
At the time this article was published Navjot Kaur does not own shares of any of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of Emerson Electric. The Motley Fool has a disclosure policy.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.