$4.2B Acquisition of Baldor Appears to Be on Schedule

by Robert Bell  on Monday, Jan. 24, 2011 12:00 am  

Kermit Kuehn, an economist at the University of Arkansas at Fort Smith, said only time would tell how the Baldor purchase would affect Fort Smith.

If all goes according to plan, the $4.2 billion acquisition of Baldor Electric Co. of Fort Smith by ABB Ltd. of Zurich will be complete later this quarter. The deal will dramatically expand ABB's North American footprint, and the company is paying a 41 percent premium for Baldor's stock.

"I think it's very good news for the Fort Smith manufacturing community," said recently elected Mayor Sandy Sanders.

"Baldor has been an excellent citizen in the community," he said. "One of the impacts of the sale is that a large number of employees who have had stock over the years have realized a true gain in their value."

The deal was announced Nov. 30, and ABB agreed to pay $63.50 for Baldor shares, which had closed at $44.99 the previous day. It was the largest deal by far involving an Arkansas company that was announced in 2010.

The Swiss power and automation giant said it planned to retain Baldor's name and management, and that Fort Smith would remain the headquarters for Baldor and become the North American headquarters for ABB's combined motor and generator business.

Acquisitions sometimes come with significant layoffs within the company that's being purchased. ABB CEO Joe Hogan told investors that the company's aim was to combine the businesses and that "this is not about reducing employment significantly in any one of the businesses."

However, "the real issue is a year or two or five years down the road, whether that commitment remains," said Kermit Kuehn, a professor at the University of Arkansas at Fort Smith and director of the university's Center for Business Research & Economic Development.

"The game is changed, I guess you could say, when a global company buys a local one," Kuehn said. "There's no way of avoiding that, and they all make their decisions based on, ultimately, their interest."

Officials for Baldor declined to speak to Arkansas Business for this story, but the company has a long history of not laying off employees, though it has made work force reductions through attrition.

"We think this transaction will be especially good for our employees," John McFarland, chairman and former CEO of Baldor, told investors. "We have a lot of very talented people throughout our company and especially here in our Fort Smith, Ark., complex. We will easily absorb the additional responsibility of ABB's North American motors and generators business."

Baldor itself is no stranger to large acquisitions. In late 2006, the company bought the power systems division of Rockwell Automation Inc. of Milwaukee for $1.8 billion, a move that roughly doubled its size in terms of employees and facilities. Baldor employs 7,000 people in several countries, including about 2,000 in Fort Smith. The company's projected 2010 revenue is about $1.7 billion.

ABB employs about 117,000 people in more than 100 countries. Its 2009 revenue - the most recent full-year figure available - was $32 billion.

 

 

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