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15 November, 2019

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Baldor doubles in size by buying Rockwell`s power division for $1.8bn
Published:  15 November, 2006

Baldor is buying Rockwell Automation`s Power Systems division — consisting of the Dodge mechanical and Reliance Electric motors and repairs businesses — for $1.8bn. Rockwell announced in June that it was looking for buyer for the division, so that it could focus on its automation activities.

Reliance and Dodge logos

Baldor is paying $1.75bn in cash and 1.6 million of its own shares for the businesses. The purchase will more than double its sales, extend its operations into more profitable areas, and give it a manufacturing base in China. In the last financial year, the Rockwell businesses achieved sales worth $1bn, while Baldor`s sales were $722m.

"The Reliance and Dodge businesses are a great fit with our existing businesses," says Baldor`s chairman and chief executive, John McFarland. "The Power Systems business will complement and add strength to Baldor`s product line. This is a unique opportunity to build a stronger company for our customers, our employees and our shareholders."

The deal will broaden Baldor`s product portfolio into power transmission products and larger motors and give it a greater manufacturing capacity. The company says the merger will provide "strong opportunities for synergies and cost savings" and expects the deal to deliver $30m of savings within three years.

The businesses being sold employ 4,300 people at 14 manufacturing plants. Baldor has 3,900 employees worldwide.

Reliance high-efficiency motor

The combined company will be one of the leading North American manufacturers of industrial electric motors and power transmission products. The Power Systems division`s products include bearings, gearboxes, large AC, custom, variable speed and specialty motors, as well as small and medium sized AC motors. Rockwell is keeping some of its activities, including variable speed drives.

"Baldor is a great company with an outstanding management team," says Rockwell`s chairman and chief executive, Keith Nosbusch. "I believe there is a compelling cultural and strategic fit between Baldor and our Reliance and Dodge businesses. Both organizations have similar operating philosophies and are committed to treating employees with respect, delivering high quality products and providing exceptional service to our customers. Power Systems will benefit significantly from ownership that is dedicated to investing on a global basis to create a leading motors and power transmission business."

The three brands have a long history. "Dodge products have been available for over 125 years, Reliance motors for over 100 years and Baldor motors for over 85 years," McFarland points out.

The deal is expected to be completed in the first quarter of 2007.

Rockwell has revealed that "a small number" of its employees may have violated the US Foreign Corrupt Practices Act or other laws that prohibit payments to foreign officials to win or keep business. The revelation, in Rockwell`s annual report, says that the suspect actions "involved payments for non-business travel expenses and certain other business arrangements involving potentially improper payment mechanisms for legitimate business purposes". The company is not revealing how many employees, or which government, were involved.

Rockwell has reported its suspicions to the US Department of Justice and the US Securities and Exchange Commission. It has also hired an external counsel to investigate the possible violations

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