SWISS ENGINEERING group ABB has agreed to buy US electrical components maker Thomas Betts for $3.9 billion to ramp up its presence in the world’s largest market for low-voltage products.
Under the terms of yesterday’s deal, ABB will pay $72 per share in cash – a 24 per cent premium over the stock’s closing price on Friday – for the company, which supplies the construction, communications and power industries with connectors for cables, steel masts and heating and ventilation products.
Chief executive Joe Hogan said the acquisition would open up a potential US market for low-voltage products of about $24 billion for ABB’s most profitable product range. The deal would bring ABB’s expenditure on companies in the US to about $9 billion since Mr Hogan took the helm in 2008, as he seeks to plug gaps in the group’s portfolio.
Thomas Betts, which reported strong sales and profit growth yesterday, sells many of its products to US utilities, and ABB is hoping to grab business as these companies boost spending over the next few years to bring older plants in line with new environmental regulations.
“Eighty per cent of the revenue of our low-voltage business is contained between China and Europe, and the US has the world’s largest, so our primary intent here is to make sure we penetrate that market,” Mr Hogan told a conference call. The deal values Thomas Betts at a multiple of 9.9 times 2011 core earnings, which compares with an average of 11.4 paid in similar takeovers since 2000, according to ABB. It expects some $200 million in annual cost savings from the deal by 2016.
Shares in ABB, which makes equipment for oil, gas and utility companies, were down 1.7 per cent at 19.10 Swiss francs by lunchtime, underperforming a 1.3 per cent European Industrial Goods and Services sector.
Under the leadership of American Hogan, ABB has used its war chest to boost its presence in North America, buying industrial motor firm Baldor Electric for $4.2 billion in 2010 and spending more than $1 billion on US software firm Ventyx.
Through the deal, ABB will gain access to a network of more than 6,000 distributor locations and wholesalers in North America. – (Reuters)
