Industrial motors company A. O. Smith Corp. has agreed to sell its electric motor segment to Regal Beloit Corp. for $875 million in cash and stock, saying global consolidation and competition in the industry have accelerated.
A. O. Smith, which also makes heating equipment and electric motors, said it plans to use the net proceeds from the sale to explore opportunities in high growth markets and expansion into new geographies and adjacent technologies.
Because of global consolidation and the emergence of a number of international competitors, the electric motor industry has been undergoing a significant transformation over the last several years.
The consolidation.........which has accelerated this year, prompted us to evaluate the potential sale of our motor business, with the expectation that we would reinvest the proceeds into high growth opportunities, said A. O. Smith chief executive Paul Jones.
With the sale, A. O. Smith said its core business will be manufacturing residential and commercial water heating equipment and water purification equipment, which reported sales of $1.1 billion for the first nine months of 2010.
Beloit, Wisconsin-based Regal Beloit expects the acquisition, its seventh this year, to add annual sales of over $700 million and to be accretive in the first full year following the acquisition, excluding costs. Royal Beloit makes electrical and mechanical motion-control products.
The sale comprises of $700 million in cash and about 2.83 million shares of Regal Beloit common stock.
A. O. Smith's electrical products unit manufactures an extensive line of fractional horsepower, integral horsepower, and hermetic motors for residential and commercial applications.
For the first nine months of 2010, the division reported operating earnings of $61.9 million on sales of $539.4 million. Headquartered in Tipp City, Ohio, the electric motor division employs around 7,800 people at 20 manufacturing plants in the United States, Mexico, China, and England.
The companies expect to close on the transaction in the first half of 2011.
Shares of A. O. Smith ended Friday's trading at $43.07, while Regal Beloit closed at $63.75 on the NYSE.