ABB to become world leader in motion technology

ABB is set to become to largest manufacturer and supplier of motion technology in the world, after announcing it plans to buy-out Baldor Electric Company.

ABB is set to become to largest manufacturer and supplier of motion technology in the world, after announcing it plans to buy-out Baldor Electric Company.

ABB will keep the Baldor brand and management team, and expects the investment to be so lucrative that it will make back its outlay of US$4.2 billion in a year.

“Baldor is a great company with an extremely strong brand in the world’s largest industrial market,” said ABB’s global CEO, Joe Hogan, in a statement.

“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.”

Chairman of the board and CEO of Baldor, John McFarland, 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 reportedly 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 Baldor’s current president and COO, and CEO designate, Ron Tucker.

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 US$184 million on revenue of US$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.

“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 US$200 million in annual synergies by 2015, consisting of more than US$100 million annual cost synergies and at least the same global revenue synergies. We estimate two-thirds of these synergies will be realised 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.