Nidec pays $1.2bn for Emerson’s motors and drives businesses
The acquisitive Japanese motor-maker Nidec has agreed to pay $1.2bn in cash for Emerson Electric’s Motors & Drives and Electric Power Generation businesses. The acquired operations include the Welsh-based drives manufacturer Control Techniques and the French motor- and generator-maker, Leroy-Somer. A key driver for Nidec is a desire to reduce its current dependence on its small precision motors activities.
The deal follows Nidec’s earlier acquisition (in 2010) of Emerson’s Motors & Controls business, which now trades as Nidec Motor Corporation.
Nidec says that the new deal will allow it to combine its Nema portfolio, aimed mainly at the North American market, with Emerson’s IEC platform, generating cross-selling opportunities around the world. It will also be able to combine its own strength in medium-voltage (MV) generators above 10MW with Leroy-Somer’s smaller LV and MV generators.
Nidec plans to combine its existing MV drives activities with Control Techniques’ drives that target the automation and machine controls markets – an area where, Nidec admits, it has “plenty of room for improving its presence”.
Nidec adds that it already has a strong foothold in the North American market for HVAC and pump drives where the acquired businesses “do not currently have a meaningful presence”. The combination will allow Nidec to sell packages of motors and drives into key markets.
Another area of potential synergy is elevator drives, where Nidec will be able to combine its existing elevator motors with Emerson’s dedicated drives products. In the future, it plans to develop motor and drives packages for the elevator market.
Other potential areas for expansion include “new-generation” motor controls, AGVs (automated guided vehicles) and robotics, which it will target with its enlarged portfolio of servomotor and gears products. Nidec also plans to combine its encoder and motor products in integrated modules with newly acquired wind turbine pitch controllers.
The acquired businesses employ about 9,700 people and in 2015 produced an EBITDA of $175m on sales of $1.67bn. This was a drop from the EBITDA of $260m on sales of almost $2bn in 2014.
The biggest segment of the acquired activity in terms of sales is the LV and MV generators business, spanning ratings from 5kW to 25MW, which achieved sales worth $780m in 2015. The next largest is Leroy-Somer’s motors and drives activities with sales of $529m, followed by Control Techniques’ drives and servomotors activities which generated sales worth $374m in 2015.
The acquired business employs 6,432 people in the EMEA region, 1,872 in Asia-Pacific and 1,408 in the Americas. There are 22 manufacturing sites in EMEA and 10 in the Americas. Almost half (45%) of sales have been in Western Europe, followed by US and Canada (26%) and China (11%).
In terms of the Emerson division’s product mix, motors and LV alternators each account for 31% of revenues, followed by drives on 22% and MV/HV alternators on 15%.
Nidec says that the acquired business has a strong brand, and a good customer base, but has experienced a cyclical decline recently as a result of falling oil prices and weak macro-economic conditions. However, it expects the business to expand as the cycle recovers and it achieves synergies in the mid-to-long term.
Nidec expects the acquisition to help it to hit its target of ¥2 trillion ($20bn) in sales by 2020 – up from ¥1.2 trillion ($11.8bn) in 2015. Some ¥500bn of the new revenues will come from acquisitions.
The Emerson deal is the latest in a string of acquisitions by Nidec, including three in 2012: the Italian motors and drives manufacturer, Ansaldo; the encoder-maker, Avtron; and the commercial motor producer, Kinetek. Earlier this year, Nidec acquired the Romanian appliance motor manufacturer, Ana Imep.
Emerson’s chairman and CEO David Farr says that the disposal of the motors and drives business “represents another step in our strategic repositioning to restructure and align our business amidst a challenging global macroeconomic environment. Upon completing the transaction, Emerson will be better positioned to accelerate growth and value creation over time, while Nidec will have a unique opportunity to strengthen its global motor presence and expand into drives and power generation.”