1/30/2012 1:25 AM ET
(RTTNews) - Swiss engineering company ABB Ltd. (ABB: News ) has agreed to buy U.S.-based electrical components maker Thomas & Betts Corp. (TNB: News ) for $72 per share in cash or around $3.9 billion to expand its presence in the North American low-voltage products market.
The offer price represents a 24 percent premium to Thomas & Betts' closing stock price on January 27. The transaction is expected to close by the middle of 2012. The company employs 9,400 people.
The transaction is expected to be accretive within the first year after closing excluding one-time charges and implementation costs.
Combining Thomas & Betts' electrical components and ABB's low-voltage protection, control and measurement products is expected to create a broader low voltage portfolio. This portfolio can make use of Thomas & Betts' about 6,000 distributor locations and wholesalers in North America, and ABB's distribution channels in Europe and Asia.
The strengthened product portfolio and improved distribution network would enable ABB to double its addressable market in North America to about $24 billion.
Commenting on the deal, Joe Hogan, ABB's CEO, said, "Strategically, it's a great fit. This is another big step toward our goal of expanding our presence in the key North American market. The transaction clearly supports our 2015 growth and profitability targets, and meets all of our return-on-investment criteria for creating shareholder value."
Combined with ABB's North American low-voltage products business, Thomas & Betts will become a new global business unit led out of Memphis under the leadership of Thomas & Betts Chairman and CEO Dominic Pileggi.
ABB expects the deal to deliver around $200 million in annual synergies by 2016. The majority of cost synergies are expected to come from sourcing and purchasing efficiencies.
The deal would be ABB's second major acquisition under Hogan, who joined the company in 2008 from General Electric Co. (GE). ABB's last major deal was in November 2010 when it purchased Baldor Electric Co., a U.S.-based maker of electric motors, for about $3.1 billion.
ABB has secured a $4 billion, fully underwritten bridge financing commitment from Bank of America Merrill Lynch, which it intends to repay through cash and the issuance of debt.
Meanwhile, Thomas & Betts also announced improved fourth-quarter financial results today. The company earned $56.84 million or $1.08 per share in the quarter, up from $39.98 million or $0.76 per share in the prior year.
Excluding an $0.08 per share benefit from a reduction in the annual effective tax rate, net earnings from continuing operations was $52.8 million or $1 per share. On average, 10 analysts polled by Thomson Reuters expected the company to earn $0.90 per share. Analysts' estimates typically exclude special items.
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