What Was The Reason Behind ABB Group's Acquisition of Baldor Electric for $3.1 Billion?
ABB Group, a Switzerland-based multinational company that specializes in robotics as well as power and automation, recently acquired the industrial motors company Baldor Electric Co
just a few years ago. The acquisition was in response to a push for increased energy efficiency as well as an overall company aim to increase its presence in North America.
ABB Group ended up paying around $63.50 per share for a total deal value of $3.1 billion, which represented a 41% premium on Baldor’s closing stock price. Although the price was considered very high, it was a strategic decision that has been paying dividends in recent years. The deal was estimated to yield more than $200 million a year in earnings from synergies. As increased demand for energy efficiency is anticipated around the world, and given that industrial motors use over one-fourth of all the total generated electricity, ABB put itself in prime position to increase profits. Current US energy efficiency legislation has been increasing growth in the high efficiency motors market by about 10-15%, with Canada, Mexico, Europe, Australia, and China looking to follow the same pattern. This has proven to be an extremely beneficial acquisition for ABB Group. They have played off Baldor’s strength in the North American market, whereas ABB at the time was struggling to penetrate this same market with its small motors. ABB Group is Swiss publicly-traded conglomerate that is ranked 158th as of the latest Forbes ranking. They are considered as one of the largest engineering companies in the world and largest conglomerates in the world in general.
Their operations span over 100 countries with a total of over 150,000 employees. The company is traded on the SIX Swiss Exchange in Switzerland, the Stockholm Stock Exchange in Sweden, the New York Stock Exchange in the USA, the London Stock Exchange in the UK, and the Frankfurt Stock Exchange in Germany. Annual revenue is reported to be in excess of $40 billion.
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Posted on November 5, 2014