ABB to Acquire Baldor Electric

ABB, providers of power and automation technologies, and Baldor Electric Company, a North American supplier of industrial motors, have agreed that ABB will acquire Baldor in an all-cash transaction valued at approximately $4.2 billion, including $1.1 billion of net debt.

Under the terms of the definitive agreement, which has been unanimously approved by both companies’ boards of directors, ABB will offer to purchase all of Baldor’s outstanding shares for $63.50 per share in cash. The transaction represents a 41 percent premium to Baldor’s closing stock price on Nov. 29, 2010. The Board of Directors of Baldor will recommend that Baldor shareholders tender their shares in the tender offer. The deal is expected to close in the first quarter of 2011.

The transaction closes a gap in ABB’s automation portfolio in North America by adding Baldor’s NEMA motors product line and positions the company as a market leader for industrial motors, including high-efficiency motors. Baldor also 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. This move comes at a time when regulatory changes in the U.S. and other parts of the world will accelerate demand for energy efficient industrial motion products. The acquisition will strengthen ABB’s position in the industrial motion solutions market, and will also enable ABB to tap the potential in North America for rail and wind investments, both of which are expected to grow rapidly in coming years.

“Baldor’s product range and regional scope are highly complementary to ours and give both companies significant opportunities to deliver greater value,” said Joe Hogan, ABB’s CEO.

John McFarland, Chairman of the Board and CEO of Baldor, commented: “Our Board of Directors believes this transaction is in the best interest of our shareholders, our employees and our customers. We are very pleased that ABB will locate its motor and generator business headquarters for North America in Fort Smith, Arkansas, 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, Baldor’s current president and COO, and CEO designate, 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.

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

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