This is a game-changer for ABB in the U.S., according to Joe Hogan, ABB's CEO. "When you look at the world's largest economy, which is the United States and North American marketplace overall—about 25% of the world's GDP—we've been extremely under-penetrated there for years," he says. "So it helps us to balance our portfolio geographically."
The deal also helps ABB go after the NEMA market for motion control, which ABB has "been deficient in for a number of years, particularly in discrete automation and motion," Hogan says. "This fills a huge gap from a product standpoint."
The friendly, all-cash transaction is valued at about $4.2 billion. Both companies' boards of directors have approved a definitive agreement for ABB to purchase all of Baldor's outstanding shares for $63.50 per share—a 41% premium over Baldor's closing stock price on Nov. 29. Tender offers will be sent out beginning the first week of December, and the transaction is expected to be complete by the first quarter of 2011.
The acquisition will substantially improve ABB's access to the industrial customer base in North America. The company is particularly hoping to take advantage of a growing demand for energy-efficient industrial motors prompted by U.S. regulatory changes. The U.S. market for high-efficiency motors is expected to grow 10-15% in 2011 on the back of the Energy Independency and Security Act, which takes effect in December 2010, and requires companies to install higher-efficiency motors. "The leader in that segment is Baldor," says 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. "If you combine their motors with our drives, we have a fantastic offering to serve these requirements."
Baldor will maintain its headquarters in Fort Smith, Ark., which will also become the location for the combined Motors and Generators business for North America. John McFarland, chairman of the board and CEO of Baldor, will stay with the combined business to support the integration. "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," he says.
Ron Tucker is Baldor's president and COO, and CEO designate. After the transaction is complete, he will run Baldor, including the mechanical power transmission products business and ABB's motor and generator business in North America.
