(Reuters) – Hedge fund D.E. Shaw on Tuesday called for Emerson Electric Co (N:) to split itself into two separate businesses, arguing that the move could unlock more than $20 billion worth of shareholder value.
The hedge fund, which holds a more than 1% stake in Emerson, said the industrial conglomerate’s stock was undervalued and it should split into a pure play industrial automation business and a climate technology-focused firm, in a letter to the company’s board.
“The set of steps we have proposed could result in more than 50% appreciation in Emerson’s stock price,” D.E. Shaw said in the letter.
The hedge fund also said Emerson has the potential to reduce its costs by $1 billion annually and needs to align its executive compensation with shareholder returns.
“We will carefully evaluate D.E. Shaw’s proposals as we continue to assess value-creation opportunities,” Emerson said in response to the letter.
The hedge fund’s move comes more than two weeks after Reuters reported that the D.E. Shaw was building a stake in the company and was planning to push for changes.
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