BREAKING NEWS: ABB's acquisition of Baldor seen as a big bet on energy efficiency
ABB says deal "strengthen ABB’s position as a leading supplier of industrial motion solutions, and will also enable ABB to tap the huge potential in North America for rail and wind investments."
The announcement Tuesday morning that ABB had acquired Arkansas-based Baldor Electric Co. in a $4.2 billion deal was met with optimism by analysts in the industry who see a good match between Baldor’s NEMA Premium Motors offering and ABB’s global power transmission business.
The resulting merger will, in ABB’s words, “strengthen ABB’s position as a leading supplier of industrial motion solutions, and will also enable ABB to tap the huge potential in North America for rail and wind investments, both of which are expected to grow rapidly in coming years.”
According to a report on MarketWatch.com, a Swiss analyst said the acquisition bolsters revenues at ABB by about 5.8% and earnings by 6.3%. “The acquisition of Baldor would make strategic sense and is hence a welcome move to further strengthen ABB’s existing industry-leading market position in drives and motors,” said Panagiotis Spiliopoulos, analyst at Swiss-based Vontobel Research in a note to investors. “But the recommended offer price is clearly at the higher end of the economically justifiable range.”
Baldor is a great company with an extremely strong brand in the world’s largest industrial market,” said Joe Hogan, ABB’s CEO. “Baldor’s product range and regional scope are highly complementary to ours and give both companies significant opportunities to deliver greater value to our customers.”
Hogan told the New York Times that the acquisition gives ABB access to the potential growth in drives and motors and a more market-centric approach to energy in the coming years.
Another factor is the expected growth of the motors market following the December 19 adoption of tougher standards for industrial motors in the U.S. A Wall Street Journal article speculated that ABB expects those standards to be adopted by other countries, which makes Baldor’s market leadership an advantage beyond the U.S.
John McFarland, Chairman of the Board and CEO of Baldor, commented: “Our Board of Directors believes this transaction is in the best interest of our shareholders, our employees and our customers. It demonstrates the value our employees have created and the strength of our brand and products in the global motors industry. We are excited about the opportunity to join ABB’s worldwide family as we have always respected ABB. 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.” John McFarland will stay with the combined business to support a successful integration.
“ABB is well known in the marketplace for premium, innovative and advanced products. We have respected them as both a market participant and a value-added supplier for many years,” said Ron Tucker, Baldor’s current President and COO, and CEO designate. Ron Tucker will run Baldor including the mechanical power transmission products business and ABB’s motor and generator business in North America after the transaction is completed.
The US market for high-efficiency motors is expected to grow 10 to15 percent in 2011on the back of new regulations, effective in December this year. Similar regulations in Canada, Mexico and in the European Union are expected in 2011.
“ABB and Baldor will be able to offer our North American and global customers an unparalleled range of high-efficiency industrial products and services to help them meet their new demands,” said 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.
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Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.
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