ABB and Baldor Electric Company have agreed that ABB will
acquire Baldor in an all-cash transaction valued at approximately $4.2 billion,
including $1.1 billion of net debt.
Under the terms of the definitive agreement, which has been
unanimously approved by both companies’ Boards of Directors, ABB will commence
a tender offer to purchase all of Baldor’s outstanding shares for $63.50 per
share in cash. The transaction represents a 41 percent premium to Baldor’s
closing stock price on Nov. 29, 2010. The Board of Directors of Baldor will
recommend that Baldor shareholders tender their shares in the tender offer. The
deal is expected to close in the first quarter of 2011.
The transaction closes a gap in ABB’s automation portfolio
in North America by adding Baldor’s strong
NEMA motors product line and positions the company as a market leader for
industrial motors, including high-efficiency motors. Baldor also adds a growing
and profitable mechanical power transmission business to ABB’s portfolio.
The transaction will substantially improve ABB’s access to
the industrial customer base in North America,
opening opportunities for ABB’s wider portfolio including energy efficient
drives and complementary motors. This move comes at a time when regulatory
changes in the US
and other parts of the world will accelerate demand for energy efficient
industrial motion products. The acquisition will strengthen ABB’s position as a
leading supplier of industrial motion solutions, and will also enable ABB to
tap the huge potential in North America for
rail and wind investments, both of which are expected to grow rapidly in coming
“Baldor is a great company with an extremely strong brand in
the world’s largest industrial market,” said Joe Hogan, ABB’s CEO. “Baldor’s
product range and regional scope are highly complementary to ours and give both
companies significant opportunities to deliver greater value to our customers.”
John McFarland, Chairman of the Board and CEO of Baldor,
commented: “Our Board of Directors believes this transaction is in the best
interest of our shareholders, our employees and our customers. It demonstrates
the value our employees have created and the strength of our brand and products
in the global motors industry. We are excited about the opportunity to join
ABB’s worldwide family as we have always respected ABB. We are very pleased
that ABB will locate its motor and generator business headquarters for North
America in Fort Smith
and we are confident that the combined global platform will be well positioned to
capitalize on meaningful growth opportunities in the future.” John McFarland
will stay with the combined business to support a successful integration.
“ABB is well known in the marketplace for premium,
innovative and advanced products. We have respected them as both a market
participant and a value-added supplier for many years,” said Ron Tucker,
Baldor’s current President and COO, and CEO designate. Ron Tucker will run
Baldor including the mechanical power transmission products business and ABB’s
motor and generator business in North America
after the transaction is completed.
Baldor is based in Fort
Smith, Arkansas, and
is a leading supplier in the large North American industrial motors industry.
In addition, Baldor offers a broad range of mechanical power transmission
products such as mounted bearings, enclosed gearing and couplings – used
primarily in process industries – as well as drives and generators. The Baldor
drives business will be combined with the larger ABB drives business to achieve
even further penetration of this important product line.
Baldor employs approximately 7,000 people and reported an
operating profit of $184 million on revenue of $1.29 billion in first nine
months of 2010. This represents an increase of 30% in operating profit and 11%
in revenue over the comparable period in 2009.
market for high-efficiency motors is expected to grow 10 to15 percent in 2011
on the back of new regulations, effective in December this year. Similar
regulations in Canada, Mexico and in
the European Union are expected in 2011.
“ABB and Baldor will be able to offer our North American and
global customers an unparalleled range of high-efficiency industrial products
and services to help them meet their new demands,” said Ulrich Spiesshofer,
Executive Committee member responsible for ABB’s Discrete Automation and Motion
division, into which Baldor’s business will be integrated alongside the
existing Motors and Generators business. “We expect to achieve over $200
million in annual synergies by 2015, consisting of more than $100 million
annual cost synergies and at least the same global revenue synergies. We
estimate two-thirds of these synergies will be realized by 2013. We intend to
build on Baldor’s excellent North American position to sell energy efficient
drives, larger motors and generators. Together, we will accelerate the
expansion of Baldor’s mechanical power transmission product portfolio into the
global process automation market using ABB’s strong channels in this sector.”
“We are deeply impressed by the skill and passion of the
Baldor team and their excellent customer relationships,” Spiesshofer said. “The
strength of Baldor’s people and executive team, which will continue under the
new ownership, will play a key role in our mutual success.”
Under the terms of the merger agreement, the transaction is
structured as a cash tender offer to be followed as soon as possible by a
merger. The tender offer is expected to commence in December and is subject to
customary terms and conditions, including the tender of at least two-thirds
(2/3) of Baldor’s shares on a fully diluted basis, and regulatory clearance.
Citi served as financial advisor to ABB and UBS Investment
Bank served as financial advisor to Baldor.