ABB to buy Baldor in $4.2 billion deal

Zurich, Switzerland-based ABB will acquire Fort Smith-based Baldor Electric Co. in a $4.2 billion deal expected to close in the first quarter of 2011.

The surprising news was first released late Monday night, with conference calls with analysts and the media planned for Tuesday. (The City Wire will post more information throughout the day on this story.)

According to a joint press release, the boards of both companies have approved the deal, which includes a $63.50 price for Baldor’s outstanding shares. The share price is 41% higher than Baldor’s closing stock price on Nov. 29 of $45.11.

The deal also includes ABB assuming the $1.1 billion in debt remaining from Baldor’s $1.8 billion acquisition of Rockwell Automation subsidiaries (Dodge, Reliance) in November 2006.

The good news for the Fort Smith region is that ABB will not move the company headquarters.

“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.

The ABB Group is a global manufacturer of electric motors, drives, power system components, circuit breakers, switches and numerous other devices used in power and automation systems. The company operates in 100 countries and employs 117,000.

Baldor, a maker, designer and marketer of industrial electric motors, motor drives, power transmissions and generators, employs between 7,000 and 7,500 in 26 plants in five countries and sales offices serving more than 80 countries. About 2,000 are employed in the Fort Smith area.

Reasons given by ABB for acquiring Baldor include:
• 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 adds a growing and profitable mechanical power transmission business to ABB’s portfolio.

• 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.

• The 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 leading supplier of industrial motion solutions, and 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.

• The move combines Baldor’s leading position in North American motors and ABB’s global leading position in drives and motors.

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

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

John McFarland, board chairman and Baldor CEO, noted in the statement: “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 stay with the combined business to support a successful integration. 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. Tucker, now Baldor’s president and COO, was recently named the next CEO effective Jan. 1.