ABB, Zurich, Switzerland, long a major player internationally in power systems, drives and industrial motors, has nonetheless struggled to gain a significant foot-hold in the North American industrial market. In December, though, ABB announced a move that will give it much greater leverage in the multi-billion dollar North American industrial motors business and position it as a global leader for movement and control in industrial applications.
The company has been on a buying spree — or attempted buying spree — over the past year, armed with a multi-billion-dollar fund of cash. ABB was successful in its acquisition of Ventyx Systems in May, a move that bolstered ABB's offerings in network management software for smart grid applications, but it lost a billion-dollar bidding war for U.K.-based UPS giant Chloride Systems to Emerson Electric in July.
ABB now can claim a bigger win with its agreement to buy the largest industrial motor manufacturer in the U.S., Baldor Electric Co., Fort Smith, Ark., in an all-cash transaction valued at approximately $4.2 billion, including $1.1 billion of net debt.
The transaction closes a gap in ABB's automation portfolio in North America by adding Baldor's NEMA motors product line and positions the company as a market leader for industrial motors. Baldor also adds a growing and profitable mechanical power transmission business to ABB's portfolio. The transaction will substantially improve ABB's access to the industrial customer base in North America, opening opportunities for ABB's energy-efficient drives and complementary motors.
This move comes at a time when regulatory changes in the United States and other parts of the world are expected to accelerate demand for energy-efficient industrial motion products, ABB said in the release announcing the deal. The acquisition will also enable ABB to tap the huge potential in North America for rail and wind investments.
The U.S. market for high-efficiency motors is expected to grow 10 to 15 percent in 2011 on the back of new regulations, effective in December this year, ABB said. Similar regulations in Canada, Mexico and in the European Union are expected in 2011.
“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.”
“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,” said John McFarland, Baldor chairman and CEO, who will stay with the combined business to support the integration.