ABB buys Baldor for $3.1 billion to bolster drives

ABB Ltd, the Swiss maker of factory robots and power transmission gear, agreed to buy Baldor Electric Co for about $3.1 billion in cash to expand in the North American market for industrial motors and drives.

Shareholders of Fort Smith, Arkansas-based Baldor will receive $63.5 a share, ABB said in a statement today. That’s 41 per cent higher than Baldor’s closing price of $45.11 yesterday. The deal, in which ABB will also assume an additional $1.1 billion in debt, is expected to close in the first quarter.

Chief Executive Officer Joe Hogan has increased the pace of acquisitions as he puts Zurich-based ABB’s $5.3 billion in net cash to use. He purchased software maker Ventyx Inc for more than $1 billion this year, and made an offer for Chloride Group Plc, only to be outbid by Emerson Electric Co. Hogan said today he still has excess cash and will continue to seek deals.

“We see significant potential for ABB to use Baldor distribution to expand its drives business in the US, as well as a more general build out of its discrete automation business,” said Goldman Sachs Group analysts led by Tim Rothery in a note to clients today.

Cost cuts
ABB rose as much as 0.17 Swiss francs, or 0.8 per cent, to 19.69 francs, and traded at 19.57 francs as of 12.22 pm in Zurich. The stock has lost 1.9 per cent in value this year.

Hogan is close to completing a $3 billion cost-cutting programme, and ABB said today that integrating Baldor will generate more than $100 million in initial annual savings.