ABB to buy Baldor Electric for $3.1 billion

By Catherine Bosley

ZURICH (BestGrowthStock) – Swiss engineering group ABB (ABBN.VX: ) is to buy U.S. industrial motors firm Baldor Electric Co (BEZ.N: ) for $3.1 billion, to capitalize on a global push for energy efficiency and boosting its North America presence.

The agreed price of $63.50 a share represented a 41 percent premium to Baldor’s closing price on November 29, ABB said on Tuesday, adding the acquisition included $1.1 billion net debt.

ABB expected more than $100 million in annual cost synergies and significant global revenue synergies of at least the same amount. “The transaction will substantially improve ABB’s access to the industrial customer base in North America,” it said.

ABB shares were indicated to open up 0.4 percent, according to premarket data from Clariden Leu.

ABB’s buy comes amid a busy time for deals in the energy and power sector which has been the most active for mergers and acquisitions this year with $422 billion of deals so far, according to Thomson Reuters data.

The biggest deal in the sector this year was French utility GDF Suez’s (GSZ.PA: ) acquisition of Britis peer International Power (IPR.L: ), to create the world’s largest utility with annual revenue of 84 billion euros ($110 billion).

Analysts had been expecting ABB, whose products include circuit breakers and industrial robots, to do a deal given its large pile of cash.

It had $5.3 billion in net cash at the end of the third quarter, and has said it was on the lookout for acquisitions, possibly in the automation sector or in the United States.

ABB said the deal with Baldor would position it to profit from an increased demand for energy efficiency, noting that industrial motors use a quarter of all electricity generated.

It said U.S. energy efficiency legislation should drive 10-15 percent growth in the U.S. high efficiency motors market and it expected similar regulations in 2011 for Canada, Mexico and Europe, with Australia, China and others likely to follow.

Baldor, which employs about 7,000 people and is based in Fort Smith, Arkansas, produces industrial electric motors as well as a range of mechanical power transmission products, drives and generators.

It competes with U.S.-listed General Electric (GE.N: ) and German group Siemens (SIEGn.DE: ).

ABB, whose roots date back to a 19th-century company that made steam turbines, expected the transaction to close in the first quarter of 2011 and to be earnings accretive in the first year.

Earlier this year, ABB raised its stake in its Indian subsidiary and spent more than $1 billion on U.S. software group Ventyx.

But it pulled out of bidding for British power supply systems maker Chloride after rival U.S. suitor Emerson Electric (EMR.N: ) offered a higher price.

Citigroup (C.N: ) served as adviser on the deal to ABB while UBS (UBSN.VX: ) advised Baldor.

(Editing by Dan Lalor)

($1 = 0.7606 euro)

ABB to buy Baldor Electric for $3.1 billion