ABB to buy Baldor Electric for $3.1bn

 
City A.M. Reporter
SWISS engineering group ABB is to buy US industrial motors firm Baldor Electric Co for $3.1bn (£2bn) plus debt of $1.1bn.

The move is aimed at closing a gap in ABB's automation portfolio and boosting its presence in north America.

The agreed purchase price of $63.50 a share represents a 41 per cent premium to Baldor's closing price on November 29 and the acquisition also includes $1.1bn in net debt, ABB said.

ABB expects to generate more than $100m in annual cost synergies and significant global revenue synergies of at least the same amount.

The deal was unanimously approved by the boards of both companies.

"The transaction will substantially improve ABB's access to the industrial customer base in North America," the Zurich-based group said in a statement.

ABB's buy comes amid a busy year for deals in the energy and power sector, which with deals worth $422bn so far has been the most active for mergers and acquisitions this year, according to Thomson Reuters data.

The biggest deal in the sector this year was France's GDF Suez's acquisition of Britain's International Power, to create the world's largest utility with annual revenue of €84bn.

Analysts had been expecting ABB, whose products include circuit breakers and industrial robots, to do a deal given its large pile of cash.

It had $5.3bn in net cash at the end of the third quarter, and has said it was on the lookout for acquisitions, possibly in the automation sector or in the United States.

ABB, whose roots date back to a 19th-century company that made steam turbines, expects the transaction to close in the first quarter of 2011 and to be earnings accretive in the first year.

Baldor, which employs about 7,000 people, is based in Fort Smith, Arkansas, produces industrial electric motors, as well as a range of mechanical power transmission products, drives and generators.

Citigroup served as adviser on the deal to ABB while UBS advised Baldor.