ABB buys Baldor for

$3.1 bn to bolster drives

BLOOMBERG
Berlin, 30 November

BB Ltd, the Swiss mak-

A er of factory robots and

power transmission
gear, agreed to buy Baldor Elec-
tric Co for about $3.1 billion in
cash to expand in the North
American market for industri-
al motors and drives.
Shareholders of Fort Smith,
Arkansas-based Baldor will
receive $63.5 a share, ABB said
in a statement today. That’s
41 per cent higher than Bal-
dor’s closing price of $45.11
yesterday. The deal, in which A file photo of an ABB plant in Hanau, Germany
ABB will also assume an ad-
ditional $1.1 billion in debt, is gramme, and ABB said today billion purchase of American
expected to close in the first that integrating Baldor will gen- Power Conversion Corp in 2006,
quarter. erate more than $100 million the data show.
Chief Executive Officer Joe in initial annual savings. The Based on Baldor’s forecast
Hogan has increased the pace former General Electric Co ex- earnings before interest and
of acquisitions as he puts ecutive took over at ABB in 2008 tax of $294 million for 2011,
Zurich-based ABB’s $5.3 bil- with a track record of deal-mak- ABB is paying about 14 times
lion in net cash to use. He pur- ing, including the purchase projected earnings, compared
chased software maker Ventyx of UK-based Amersham Plc for with about 16 times earnings
Inc for more than $1 billion this about $10 billion in 2004, then for the average multiple in the
year, and made an offer for GE’s biggest acquisition. industry in the last five years,
Chloride Group Plc, only to be Hogan told journalists on a the data show.
outbid by Emerson Electric Co. call that he had had Baldor “The strategic fit looks good,
Hogan said today he still has in his sight “for a while”, and but comes at a price,” said eq-
excess cash and will contin- that the two companies came uity analysts James Stettler and
ue to seek deals. in close contact over the last Alasdair Leslie of UniCredit in
“We see significant poten- six months. There are no signs a note to clients today.
tial for ABB to use Baldor dis- of a counter-bid for the com- The purchase will add to
tribution to expand its drives pany, and ABB feels confident earnings in the first year, and
business in the US, as well as it is bidding an attractive pre- existing management will be
a more general build out of mium, Hogan said. kept in place, ABB said. Fort
its discrete automation busi- “We’ve been looking at op- Smith will become the head-
ness,” said Goldman Sachs portunities for over a year now,” quarters for the combined mo-
Group analysts led by Tim Roth- the executive said on the call. tor and generator business for
ery in a note to clients today. North America.
Earnings boost Baldor CEO John McFar-
Cost cuts The average premium paid for land, who will step down at the
ABB rose as much as 0.17 Swiss electrical-components compa- end of the year and be suc-
francs, or 0.8 per cent, to 19.69 nies over the past five years was ceeded by Chief Operating Of-
francs, and traded at 19.57 about 14 per cent, with $70.4 ficer Ronald E. Tucker, said his
francs as of 12.22 pm in Zurich. billion of total transactions dur- company backs the bid as be-
The stock has lost 1.9 per cent ing the period, according to da- ing “in the best interest of our
in value this year. ta compiled by Bloomberg. The shareholders, our employees
Hogan is close to complet- biggest deal in the period was and our customers,” according
ing a $3 billion cost-cutting pro- Schneider Electric SA’s $6.1 to the statement.