ABB-Baldor deal seen as a regional economic positive

The $4.2 billion all-cash deal by ABB to buy Baldor Electric Co. should be seen as a good thing according to three local business and civic leaders.

Zurich, Switzerland-based ABB — a global power and automation systems company that employs 117,000 — announced late Monday (Nov. 29) the move to acquire Fort Smith-based Baldor in a deal expected to close in the first quarter of 2011. The Baldor board unanimously agreed to the deal.

ABB said it will keep the corporate operation in Fort Smith.

“ABB retains Baldor management and brand. Fort Smith remains the headquarters for Baldor, and becomes the headquarters for the combined motor and generator business for North America,” noted the joint release from ABB and Baldor.

John Taylor, senior vice president of John Taylor Financial-Sterne Agee and a member of the board of directors at Fort Smith-based Benefit Bank, said the $63.50 per share price in the ABB-Baldor deal provides an immediate economic stimulus to all Baldor employees, including the about 2,000 in the Fort Smith region.

The $63.50 price represents a more than 40% gain on the company’s Nov. 29 closing price of $45.11. Baldor shares (NYSE: BEZ) were trading around $63.25 in midday trading, a one-day gain of more than 40%.

“The important thing is, that many of the employees’ financial stability and their ability to some day retire, improved dramatically overnight,” Taylor explained.

Will the millions of dollars in stock gains prove to be an economic stimulus in the Fort Smith region? Taylor said it is “easy to assume a stimulus, but I’m not sure how you would quantify that.” He added Baldor employees might feel more comfortable about their financial position, and that could translate into a greater willingness to “spend more on Christmas, or maybe go out and by a new car.”

Additionally, Taylor said the ABB move to place its North American headquarters in Fort Smith helps reduce or eliminate the “oh no” response within a community when a local company is acquired.

“There is no way that it can’t be anything other than good news (for the Fort Smith regional economy),” Taylor said. “We talk about recruiting advanced manufacturers or the corporate jobs … this thing with ABB is likely to bring both. … ABB is a sophisticated manufacturer, and if they grow like they say they will in North America, they’ll need, for example, more engineers. So you also have a deal that could be good news for the university (University of Arkansas at Fort Smith) and its fledging engineering program.”

Paul Harvel, president of the Fort Smith Regional Chamber of Commerce, sees the deal as a chance to bring more corporate and manufacturing jobs to the region. He said the chamber will work with the Governor’s office and the Arkansas Economic Development Commission to assess the chances of convincing ABB to locate as many jobs as possible in the region.

“We’re going to look at this like an expansion opportunity, because, to me, that’s really what this is,” said Harvel, who is also a commissioner with the AEDC. “I’m very comfortable it will be a long term good thing for us, because if you look at the history of their (Baldor’s) decisions, they have always been good for Fort Smith.”

Acting City Administrator Ray Gosack said he is “initially re-assured” by the ABB plan to locate its North American headquarters in Fort Smith.

“However, Fort Smith will need to demonstrate its value and strengths to ABB officials. We must convince the new owners that Fort Smith is the best long-term location for ABB’s North American headquarters,” Gosack added in an e-mail interview. “This merger will likely demonstrate the importance of quality of place in attracting and retaining jobs of all types. Our favorable cost of living and doing business will be advantageous. However, we must also be a desirable place to live and work.”

Gosack also noted that Baldor has a “significant capital investment” in the Fort Smith area, which makes it less likely ABB would abandon the corporate and manufacturing operations in Fort Smith.

“The region also has a strong work ethic, a well-trained work force, excellent transportation systems (road, rail, barge), abundant utilities, and supportive educational capabilities. All of these factors work to Fort Smith’s advantage, regardless of where the ownership is located,” Gosack noted.