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Strategies & Market Trends : Speculating in Takeover Targets
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From: richardred11/30/2010 1:30:08 AM
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ABB to Buy Baldor Electric for $4.2 Billion, Adding U.S. Sales of Motors
By Benedikt Kammel - Nov 30, 2010 12:49 AM ET

ABB to Buy Baldor Electric for $4.2 to Expand Drives

Old isolators are seen outside the ABB Ltd. plant in Hanau, Germany. Photographer: Hannelore Foerster/Bloomberg

ABB Ltd., the Swiss maker of factory robots and electrical equipment, agreed to buy Baldor Electric Co. in a deal valued at $4.2 billion including debt to expand on the North American market for industrial drives and motors.

Zurich-based ABB is bidding $63.5 for each share of Fort Smith, Arkansas-based Baldor, according to an e-mailed statement today. Baldor shares closed at $45.11 yesterday. The transaction includes $1.1 billion in debt, and ABB aims to close the purchase in the first quarter of next year, it said.

“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,” ABB said.

ABB Chief Executive Officer Joe Hogan has increased the pace of acquisitions as he puts the company’s cash to use. He purchased software maker Ventyx Inc. for more than $1 billion this year, and made an offer for Chloride Group Plc, only to be outbid by Emerson Electric Co. Hogan, a former executive at General Electric Co., is close to completing a $3 billion savings plan, and ABB said today the Baldor purchase will provide more than $100 million in annual cost cuts.

Adding to Earnings

The purchase will add to earnings in one year, and the company aims to keep current management in place, ABB said. The company said Fort Smith will becomes the headquarters for the combined motor and generator business for North America.

Baldor CEO John McFarland, who will step down at the end of the year and be succeeded by Chief Operating Officer Ronald E. Tucker, said his company back the bid as being “in the best interest of our shareholders, our employees and our customers,” according to the statement.

The U.S. company has about 7,000 employees and specialises in large industrial motors, a market ABB predicts will grow 10 percent to 15 percent in 2011 as new energy regulation comes in place. The company also makes power transmission products such as mounted bearings, enclosed gearing and couplings used in process industries, as well as drives and generators.

By 2015, ABB aims to reap more than $200 million in annual savings, and two-thirds of these reductions will be realized by 2013, the company said. The offer for Baldor will start in December and is conditional upon at least two-thirds of Baldor shareholders tendering their shares, ABB said.

ABB will hold a conference call at 8 a.m. local time and at 4 p.m. for journalists for analysts to discuss the purchase.
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