Baldor Electric Company, a maker of industrial electric motors, drives and generators, announced it has signed a definitive agreement to acquire the Reliance Electric Company and certain of its affiliated companies (the Power Systems business) of Rockwell Automation, Inc.
Baldor will purchase 100% of the equity interest in the Power Systems business for $1.8 billion, comprised of $1.75 billion in cash and approximately 1.6 million shares of Baldor common stock. The transaction is expected to be complete in the first quarter of 2007.
The Reliance and Dodge businesses are a great fit with our existing businesses, said John McFarland, chairman and CEO of Baldor. The Power Systems business will complement and add strength to Baldors product line. Dodge products have been available for over 125 years, Reliance motors for over 100 years and Baldor motors for over 85 years. These companies have a long history of customer preference and good profitability. This is a unique opportunity to build a stronger company for our customers, our employees and our shareholders.
The transaction is said to add approximately $1 billion dollars in sales with margins higher than Baldors, provide a manufacturing base in China for the Asian markets, extend Baldor's product line into power transmission products and larger motors, and enable Baldor to provide a broader product offering and services to customers.
As part of Rockwell Automation, the Power Systems segment generated approximately $1.0 billion in revenue for the 12 months ending September 30, 2006. Baldor expects to realize annual pre-tax synergies of approximately $30 million within three years mainly from the benefits of combined purchasing, working capital management, reduced overhead and increased productivity. The transaction is expected to be approximately $0.10 accretive to Baldors earnings in the first full year.
