$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.


Valuable Name

In addition to retaining Baldor's management and headquarters, ABB is also keeping the company's name.

That's not uncommon, said Dan Curtis, director of Arkansas Manufacturing Solutions and vice president of industry for the Arkansas Science & Technology Authority.

"It's a business decision," Curtis said. "If they want to assimilate it then they may change the name and they may not. It just depends on the market and the name and what they feel is going to be to their advantage in the U.S. market. I think Baldor has a good name. They're a very reputable company, well run, and probably the name has some real value in the market."

Scott Alaniz, a chartered financial analyst and founding partner with Boston Mountain Money Management Inc. in Rogers, offered a similar assessment of Baldor. His firm doesn't have any Baldor stock, but Alaniz followed the company when he was an analyst at Stephens Inc.

"That company is extraordinarily well run, and they did an extraordinary job for their shareholders, and they have always done a great job of taking care of their shareholders," Alaniz said.

"We certainly hate to see Arkansas lose an independent publicly traded company, and Baldor is - they're top notch. I think it's one of the highest-quality public companies I've ever been involved with. It's bittersweet; I hate to see it become part of a larger firm. But they got a great price for their shareholders."

ABB's acquisition of Baldor is valued at $4.2 billion - $3.1 billion in cash and $1.1 billion in assumed debt. The Swiss company had about $5.3 billion in net cash as of the end of the third quarter. The Baldor deal followed an attempt to purchase the British power systems firm Chloride, in which ABB was outbid by Emerson Electric Co.

ABB's cash-flush position is not uncommon among large global companies.

"It's timely for large companies to buy small companies, because large companies have built up their cash reserves over the last several years," Alaniz said. "They've been deferring capital expenditures so that their balance sheets have much more cash. And as you know, cash is bringing very, very low returns."

With the sluggish growth in the global economy in the last few years, many companies might decide that organic growth will be difficult, so it might make more sense to grow through acquisition, he said.



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