'A $5B startup': CEO of Emerson spin out Copeland outlines new company's growth strategy

Ross Shuster likens his new job as CEO of Copeland, recently spun out of Ferguson-based Emerson Electric Co., as akin to leading a startup. One he admits has a big leg up as begins its operations as a stand-alone company.

"It's a $5 billion startup," Shuster said. "It's got the energy of a startup because we're able to carve it out of a company and create its new destiny, but at the same time, it's got this huge foundation and strength that you can actually build off of."

Shuster spoke Wednesday in what he said was day five of leading Copeland, formerly the Climate Technologies business of industrial technology and software giant Emerson (NYSE: EMR). The new standalone entity includes Emerson's former Copeland compressor business and brands that provide heating, air conditioning and refrigeration technology for residential, commercial and industrial customers, accounting for $5 billion in sales in fiscal 2022. It has 18,000 employees globally.

Emerson said May 31 it closed on its sale of Copeland, with New York-based alternative asset manager Blackstone (NYSE: BX) acquiring a majority stake in a deal that valued the new independent company at $14 billion.

Copeland previously was part of Emerson's Commercial and Residential Solutions segment, which had been the smaller of Emerson's two major business units under its former structure. Emerson sold its Climate Technologies business, as well as other businesses of its Commercial and Residential Solutions unit in separate deals, as part of an effort to retool its portfolio to become a "pure-play automation company," with a focus on providing industrial technology and software. Emerson will retain 40% ownership in Copeland as part of the sale of the business.

"I really see it as a positive that Emerson's retaining a 40% stake in the business," Shuster said. "(Emerson) had a direction they wanted to go, which is great, but the fact that they're holding 40% of the business really underscores the fact they do have confidence in this business and more importantly the fact that this business could be worth more through growth and focus in the future than it is today."

Shuster said he has spent his first days as Copeland's CEO meeting with staff and visiting other company sites, including its location in Sidney, Ohio, and an R&D site located about an hour away in Ohio. He said the message to employees has been that they are part of a "really strong business" that can build off its legacy at Emerson and has the ability to invest for growth under its new ownership structure.

"People feel great about being part of a standalone, focused organization. I think they all feel the excitement around that and the potential to really focus our investments and focus our growth on what's core for us," Shuster said.

The message to employees also emphasized that "what we do for the world is important," Shuster said. He said the company and its products play an outsized role in major sustainability trends, including energy efficiency, electrification, decarbonization and food availability.

"We're well positioned, doing good things and because we're doing sustainability-linked services and technologies, we have that tailwind," Shuster said.

There's opportunities to expand Copeland's focus around those sustainability trends, Shuster said. He noted that's borne out in the company's new logo, which includes the delta symbol for the letter "A" in the company's name.

"That symbolizes the fact that the world around us is changing, around some of those sustainability-linked things that we talked about, but that we also have to adapt, innovate and change to basically shape the forefront," Shuster said. "That's also part of the message, that we're going to invest in the business, we're going to be changing the way in which we approach things and a lot more focused on certain trends."

Copeland's growth strategy is expected to include increased investment in development of technologies and products, as well as expansion of its international footprint. The majority of Copeland's sales — 67% —are concentrated in the Americas, according to Emerson's most recent annual report. But some parts of the company, like the Verdant business, which helps hotel and hospitality venues manage their energy usage, and its Sensi thermostat brand, are "weighted toward the U.S. but there's global opportunities," Shuster said.

Acquisitions could also likely be part of the growth strategy, but as a spin out company, Shuster said it will likely take some time to get to a point where it's ready to begin making deals.

Though it's newly spun out, Copeland becomes one of the region's largest privately held companies. At $5 billion in revenue, it would have ranked No. 6 on the Business Journal's list of privately-held firms last year, behind Mt. Sterling, Illinois-based Dot Foods at $8.6 billion and just ahead of construction firm McCarthy Holdings at $4.4 billion.

Regulatory filings include clauses suggesting Copeland could pursue going public at some time in the future, though Shuster said it's too soon to know when or if that may happen.

Copeland has about 350 to 400 employees in St. Louis, Shuster said, adding the local employees are critical to functions like human resources and finance.

"They support all the operations around the world," he said.

Copeland is operating its headquarters from Emerson's headquarters campus in Ferguson, which the new joint venture that owns Copeland acquired as part of its acquisition of Emerson's Climate Technologies business.

Shuster has relocated to St. Louis, saying he has purchased a home in the area. He said he plans to get involved in the local community and have Copeland participate in philanthropic efforts locally and in other communities where it operates, noting the new standalone company wants to continue with Emerson's legacy of being involved in such initiatives.

Shuster joins Copeland after having most recently been CEO of Howden, a Scotland-based provider of critical air and gas handling products. Like Copeland, Howden was a spin out public company following its sale by Colfax Corp. in 2019.

Shuster said he's energized by the opportunity to shape Copeland's future as a standalone company, a process that will include lessons learned from Howden about how to build out a new independent company and best position it for growth.

"I call it a once in a lifetime experience, but I've done it twice in the last four years," Shuster said.