We're using the recent sell-off in this industrial stock to add to our position

Published Mon, Jan 23 20239:07 AM ESTUpdated Mon, Jan 23 20239:16 AM EST

Shortly after the opening bell, we will be buying 150 shares of Emerson Electric (EMR) at roughly $87.40 apiece. Following Monday's trade, Jim Cramer's Charitable Trust will own 575 shares of EMR, increasing its weighting in the portfolio to about 1.72% from roughly 1.28%. We're picking up shares of Emerson Electric (EMR) this morning as we believe last week's 10.7% sell-off in reaction to the announced hostile takeover of National Instruments (NATI) was an overreaction. To be fair, we were not surprised to see the stock down because hostile takeovers often create huge distractions, and we want our management teams to keep their eyes on the ball. But we like the update we heard this morning that suggests the two companies are talking. Emerson said in a press release this morning it is engaging with the National Instruments board and is participating in its strategic review process, which Emerson believes will lead to the sale of the company. Whether that sale goes to Emerson at an all-cash proposal of $53 per share remains to be seen. NATI's board has to do what's in the best interest of its shareholders. But if there is no second buyer out there, Emerson's offer looks compelling given the underperformance of NATI through the years. The proposed acquisition of National Instruments looks very consistent with the objectives Emerson management laid out at its November Investor Day event. It's expected to be highly accretive to adjusted EPS in its first year, the test and measurement industry has been a priority area for management, and it should increase Emerson's total percentage of software sales. Emerson sees significant of opportunities on the cost synergy side too. Like any big deal, there are some risks. Since there has been no deal agreement yet, EMR could be forced to raise its bid price beyond discipline if it really wants to get this deal done. There have also been some general concerns about the lack of overlap NATI has with EMR's existing business and the execution risk will be high for a generally newer management team. Also, the deal is expected to be highly accretive, but it won't fully plug the hole created by the Climate Technologies sale. And with a deal of this size, Emerson might not be able to fully offset its dilution through M & A and buybacks. Overall, we like the transaction at $53 per share and believe EMR shed too much market cap given the highly accretive nature of the deal. And if the two companies can't come to an agreement and EMR walks away, a relief rally would be in picture. (Jim Cramer's Charitable Trust is long EMR. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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