ABB obtains Baldor Electric and expands industrial motion presence
ABB will acquire Baldor Electric 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, 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% 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 NEMA motors product line and positions the company as a market leader for industrial motors, including high-efficiency motors. Baldor also adds a mechanical power transmission business to ABB’s portfolio.
The transaction will improve ABB’s access to the industrial customer base in North America, opening opportunities for ABB’s 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 supplier of industrial motion solutions, and will also enable ABB to tap the potential in North America for rail and wind investments, both of which are expected to grow rapidly in coming years.
“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.”
Baldor is based in Fort Smith, Arkansas, and is a supplier in the large North American industrial motors industry. In addition, Baldor offers a 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.
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.
The US market for high-efficiency motors is expected to grow 10 to15% in 2011on the back of new regulations, effective in December this year. Similar regulations in Canada, Mexico and in the European Union are expected in 2011.
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 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.
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