DOJ seeks ‘second request’ of materials in ABB-Baldor deal

ABB and Baldor Electric officials announced Tuesday (Dec. 21) that the Antitrust Division of the U.S. Department of Justice has made a second request for documents related to the pending $4.2 billion ABB purchase of Baldor.

The statement noted that the DOJ “issued requests for additional information and documentary material (“Second Request”) in connection with its review of ABB’s pending acquisition of Baldor.”

Zurich, Switzerland-based ABB announced Nov. 30 the deal to buy Fort Smith-based Baldor Electric Co. in a deal that would see ABB pay $3.1 billion ($63.50 per share) for Baldor shares and $1.1 billion to clear Baldor debt.

“ABB and Baldor believe that the DOJ issued the requests in order to give itself additional time to complete its review of the transaction. Both parties remain confident that the DOJ will conclude that the transaction raises no antitrust concerns,” noted the joint statement.

Fort Smith attorney Bill Reynolds, who has experience with federal securities matters, said he is not surprised by the second request.

“I’d say it’s normal. … This is expected, especially any time a foreign-based company buys a company based in the U.S. that may have specialized technology or patents,” Reynolds said.

The ABB-Baldor filing on Tuesday (Dec. 21) with the U.S. Securities and Exchange Commission also included an update on a class-action lawsuit filed to stop the $4.2 billion deal.

A day after ABB announced the deal, John Cottrell hired the Little Rock firm of Emerson Poynter to file a suit in Sebastian County Circuit Court. The filing is a shareholder “class action complaint based upon self dealing and breach of fiduciary duty.” The suit alleges that the $63.50 price does not reflect the future higher value of the company.

“Despite the Company’s favorable financial conditions, as reported by the Company in 2010, Baldor has nevertheless entered into the Proposed Transaction to sell the Company at a price that appears not to reflect the Company’s favorable prospects,” noted the Cottrell action filed by Scott Poynter.

The suit includes two counts, one for breach of fiduciary duty and the second for aiding and abetting breaches of fiduciary duty. The suit seeks to stop the merger and to cover attorneys fees.

On Dec. 9, Cottrell filed a motion for preliminary injunction and an emergency motion for expedited discovery. A hearing on the motion for preliminary injunction is scheduled for Jan. 6.

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.