ABB, the Zurich, Switzerland-based provider of power and automation technologies, will acquire Baldor Electric Co., the Fort Smith, Ark.-based manufacturer of industrial motors, in an all-cash transaction valued at approximately $4.2 billion, including $1.1 billion of net debt.
Under terms of a definitive agreement unanimously approved by the boards of directors of both companies, ABB will offer to purchase all of Baldor's outstanding shares at a price of $63.50 per share. This represents a 41-percent premium to Baldor's Nov. 29, 2010, closing stock price. The deal is expected to close during 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," the companies said in announcing the deal. "... Baldor also adds a growing and profitable mechanical-power-transmission business to ABB's portfolio.
"... This move comes at a time when regulatory changes in the U.S. and other parts of the world will accelerate demand for energy-efficient industrial motion products," the companies continued.
ABB and Baldor expect the U.S. market for high-efficiency motors to grow 10 to 15 percent in 2011, based on regulations taking effect in December 2010. Similar regulations are expected in Canada, Mexico, and the European Union in 2011.
Fort Smith will remain the headquarters for Baldor and become the headquarters for the combined motor-and-generator business for North America.
Ron Tucker, Baldor's current president, chief operating officer, and chief-executive-officer- (CEO-) designate, will run Baldor, including the mechanical-power-transmission-products business, and ABB’s North American motor-and-generator business after the transaction is completed. John McFarland, Baldor’s chairman of the board and CEO, will stay with the combined business to support integration.
Baldor's drives business will be combined with ABB's larger drives 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," Ulrich Spiesshofer, Executive Committee member responsible for ABB's Discrete Automation and Motion division, said. "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."
A cash tender offer was expected to commence in December and be followed as soon as possible by a merger.
Baldor, which employs approximately 7,000 people, reported an operating profit of $184 million on revenue of $1.29 billion during the first nine months of 2010. This represents an increase of 30 percent in operating profit and 11 percent in revenue over the comparable period in 2009.
The ABB Group of companies operates in approximately 100 countries and employs about 117,000 people.