Baldor Electric Co., Fort Smith, Ark., is to acquire Reliance Electric Co., Greenville, S.C., and affiliated companies including the Power Systems business of Rockwell Automation, Milwaukee.
Baldor will purchase 100% of equity interest in the Power Systems business for $1.8 billion, comprised of $1.75 billion and 1.6 million shares of Baldor common stock, valued at $50 million. The transaction is expected to be completed in the first quarter of 2007 and is subject to customary closing conditions and necessary regulatory approvals.
The combined company will be one of the leading North American manufacturers of industrial electric motors and power transmission products. The Power Systems business markets its products under the Reliance Electric and Dodge brand names.
The Reliance and Dodge businesses are a great fit with our existing businesses, says John McFarland, Baldor chairman and CEO. The Power Systems business will complement and add strength to Baldor's product line.
I believe there is a compelling cultural and strategic fit between Baldor and our Reliance and Dodge businesses, says Keith Nosbusch, Rockwell Automation chairman and CEO.
Power Systems will benefit significantly from ownership that is dedicated to investing on a global basis to create a leading motors and power transmission business.
Baldor says the transaction:
- Adds approximately $1 billion dollars in sales with margins higher than Baldor's.
- Provides a manufacturing base in China for the Asian markets.
- Extends the companys product line into power transmission products and larger motors.
- Enables Baldor to provide a broader product offering and services to customers. Provides strong opportunities for synergies and cost savings in the combined businesses.
- Adds the strength of the Power Systems management team to the companys management group.
- Increases manufacturing capability and flexibility.
- Broadens investor interest in Baldor.
The Power Systems segment generated approximately $1 billion in revenue for the 12 months ending September 30. Baldor expects to realize annual pre-tax savings of approximately $30 million within three years mainly from combined purchasing, working capital management, reduced overhead and increased productivity.