$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.

ABB has had to extend its tender offer for Baldor twice. The original offer was set to expire Jan. 10. An extension was made to allow the Antitrust Division of the U.S. Department of Justice more time to complete its review of the acquisition, a Baldor spokeswoman said.

That was the same reason for the second extension, now set to close Jan. 25. The Department of Justice approved the deal on Thursday, the last of the international regulatory hurdles. Shareholder suits have also been settled in Missouri, with one case in Arkansas scheduled to be settled by mid-February.

Both companies said they still expect the deal to close late in the first quarter.


Preferred Products

While ABB does manufacture motors and generators - two of Baldor's key products - the Swiss company hailed Baldor's high-efficiency motors as being top-of-the-line. Hogan told investors that there was less than 10 percent overlap in the two companies' products.

Baldor's high-efficiency motors are a desirable segment for ABB, which projects the market for them will grow 10 percent to 15 percent in the United States in 2011 because of new energy-efficiency regulations that went into effect in December as part of the U.S. Energy Independence & Security Act of 2007.

ABB expects similar regulations will be introduced in Canada, Mexico and across the European Union starting this year.

"As much as we kind of move forward kicking and screaming, we're moving toward more energy-efficient modes of conducting business," Kuehn said. "That's going to take a while, but I think Baldor is in a position to contribute to that and be a good participant in that trend."

But Baldor' products weren't the only factor that interested ABB in acquiring the company. Baldor's distribution network will allow ABB to greatly expand its reach in North America.

"In their motors business, a regional network of 35 sales rep entrepreneurs oversees some 400 field sales people," Hogan told investors. "It's the best-in-class market coverage in this sector and something that has been all but impossible to copy."

At the same time, ABB will use its distribution channels in Europe and the Middle East to sell Baldor products in those markets. Some of the key industries Hogan mentioned include cement, mining, oil and gas and food preparation.



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