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Regal Beloit buys Emerson unit for $1.4bn
After months of speculation, the US motors and motion control giant Regal Beloit has announced that it is buying Emerson Electric’s Power Transmission Solutions (PTS) business for $1.4bn in cash and $40m of assumed liabilities.
The deal is Regal Beloit’s biggest-ever acquisition. Other potential bidders for the PTS business are thought to have included Timken and Altra Industrial Motion.
“This acquisition will be transformational for Regal,” says its chairman and CEO, Mark Gliebe. “PTS will broaden our portfolio, diversify our end-market exposure and strengthen our global footprint.
“PTS brings complementary products and well-known brands, but more importantly a very talented team who are experts in their markets as well as very strong operators,” he adds. “We are excited to have PTS as part of the Regal family and we look forward to growing with them in our future.”
Kentucky-based PTS, currently part of Emerson’s industrial automation business, is a global leader in power transmission products and systems, including bearings, couplings, gearing, drive components, and conveyor equipment. Its brands include Browning, Jaure, Kop-Flex, McGill, Morse, Rollway, Sealmaster and System Plast. Its annual revenues are worth some $600m and it employs more than 3,000 people around the world.
PTS will become part of Regal's new power transmission segment.
“While the Power Transmission Solutions business no longer aligns with the strategic direction of our portfolio, it is a strong business with an outstanding management team that has created significant value while part of Emerson,” says Emerson’s chairman and CEO, David Farr. “This transaction allows us to better focus on our value creation priorities and provides Regal Beloit with a unique opportunity to strengthen and grow its mechanical power transmission segment.
“The business will benefit by joining Regal, who has a proven track record of success in building and growing businesses,” he adds.
The deal is expected to close in the first quarter of 2015, subject to regulatory approvals. Regal expects it to deliver $30m-worth of annual synergies within four years.
Bearings represent 44% of PTS’ business, followed by couplings (19%), conveying systems (16%), components (12%) and gearing (9%). The installed base of PTS bearings is estimated to be worth $1.74bn, followed by couplings on $1bn and conveyor components on $525m.
The bulk (70%) of PTS’ sales have been in North America, with the EMEA region accounting for 18%, and Asia-Pacific and Latin America both on 6%. The general industrial market represents a quarter of its revenues, followed by materials-handling (22%), metals (14%) and energy (11%).
At the moment, mechanical systems represent a small part of Regal Beloit’s $3.2bn annual revenues. It estimates that the combined business will generate revenues worth around $3.8bn, with control and instrumentation systems accounting for almost half (48%) of this. The climate technologies business will represent a further 29%, and the power transmission business 23%.
Over the past 30 years, the acquisitive Regal Beloit has integrated more than 50 new businesses into its operations. Its current brands include Marathon, Fasco, Genteq, Benshaw, Cemp, Century, Durst, Elco, Grove Gear, Hub City, Leeson, Master Gear, Milwaukee Gear and Unico.
