ABB to acquire Baldor Electric Company

Transaction would create global leader in industrial motion.

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ABB, the leading power and automation technology group, and Baldor Electric, a North American leader in industrial motors, announced today that the two companies 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.

The combination of the two companies would combine Baldor’s leading position in North American motors and ABB’s global leading position in drives and motors. 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.

“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.”

The acquisition would enable ABB to penetrate the North American industrial market by using Baldor’s strong North American market access; and it would allow Baldor to expand globally by using ABB’s distribution network abroad.

In the agreement, ABB would retain the Baldor management and brand. Fort Smith would remain the headquarters for Baldor, and it becomes the headquarters for the combined motor and generator business for North America.

“Our Board of Directors believes this transaction is in the best interest of our shareholders, our employees and our customers,” said John McFarland, chairman of the board and CEO of Baldor.  “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.” 

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 U.S. 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 it 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 years.

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.

The U.S. market for high-efficiency motors is expected to grow 10 to 15% 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.”

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 offer is expected to commence in December and is subject to customary terms and conditions.

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