Pentair selling valves and controls unit to Emerson for $3.15 billion

Pentair PLC will sell its valves and controls unit to Emerson for $3.15 billion, essentially ending the company's foray into that end of the oil and gas business.

The long-rumored move, announced after the markets closed Thursday, transfers 7,500 employees to Emerson. Although most of the business is in Europe, 1,500 of those employees are based in the United States.

Pentair entered the energy equipment sector in a big way four years ago when it merged with Tyco International's flow control business in a $5.3 billion stock deal. That deal basically doubled the size of Pentair, giving it a bigger presence in water filtration and its first solid footing in valves for energy producers.

Now Pentair is shedding the former Tyco business that sells valves to the energy industry. That business is one many analysts considered vulnerable to volatile cyclical swings and possible integration hiccups. Pentair took a $400 million impairment charge last year because of its valves and controls business and saw challenges continue into this year.

Still, even with the downturn in the energy sector, Pentair CEO Randall Hogan said the company "didn't have to sell" the division.

"We sold it because it's right for our strategy, and it's a good transaction for our shareholders," he said. "It's a win, win."

He noted the division ended 2015 with $1.8 billion in revenue and significantly higher profit margins and cash flow than in 2012.

But back in 2012, Pentair officials celebrated the Tyco deal as a way to make Pentair a critical supplier of industrial valves to refineries, electric companies and drilling firms around the globe.

Pentair, which is based in England but largely managed from Golden Valley, previously forecast that it would end 2016 with $6.7 billion in sales. After selling valves and controls, the company should have $4.9 billion in sales. Before the Tyco flow control merger, revenue was $3.7 billion.

Pentair is retaining several operations obtained as a result of the 2012 Tyco flow control deal, including floor and pavement heating systems, equipment enclosures for energy firms, and wastewater treatment and water filtration systems.

With the valves business gone, "we remain narrowly diversified, which allows us to prioritize investments and affords us opportunities to grow organically and use our strengthened balance sheet as opportunities arise," Hogan said.

Once the sale to Emerson is complete, Pentair will consist of three key businesses: water quality systems, flow and filtration solutions and technical solutions. The divisions will focus on water quality and availability, enclosures that protect equipment and buildings, systems that improve customers' industrial and process efficiencies and on food and beverage processing.