Merger and acquisition activity throughout the mining industry maintained a consistent pace throughout 2010 and the year’s final weeks were no exception, with one major mining equipment-related acquisition taking place along with transactions involving well-known engineering, procurement and construction management (EPCM) providers.
Swiss power and automation technology supplier ABB announced in late November it had arranged to acquire Baldor Electric Co., a major industrial motor supplier based in Fort Smith, Arkansas, USA, for about $4.2 billion including $1.1 billion of debt. The all-cash deal, which has the approval of both companies’ boards of directors, is expected to close in the first quarter of 2011.
The acquisition, according to a press statement issued by ABB, closes a gap in its automation portfolio in North America by adding Baldor’s NEMA motor product line and better positions the company in the market for industrial motors, including high-efficiency motors. The acquisition also will add Baldor’s mechanical power transmission business to ABB’s portfolio.
Ron Tucker, Baldor’s current president and COO, and CEO designate, will oversee Baldor including the mechanical power transmission products business and ABB’s motor and generator business in North America after the transaction is completed.
Baldor employs approximately 7,000 people and reported an operating profit of $184 million on revenue of $1.29 billion in the first nine months of 2010. This represents an increase of 30% in operating profit and 11% in revenue over the comparable period in 2009. According to ABB, the U.S. market for high-efficiency motors is expected to grow 10%–15% in 2011 due to new energy-related regulations taking effect in 2010. Similar regulations in Canada, Mexico and the European Union are expected in 2011.
Ulrich Spiesshofer, executive committee member responsible for ABB’s Discrete Automation and Motion division, into which Baldor’s business will be integrated alongside the existing Motors and Generators business, said, “We expect to achieve over $200 million in annual synergies by 2015, consisting of more than $100 million annual cost synergies and at least the same global revenue synergies. We estimate two-thirds of these synergies will be realized by 2013.”
On December 22, engineering and construction services provider Aker Solutions said it entered into a share purchase agreement to transfer operations within its Process and Construction business area to Jacobs Engineering Group Inc.
According to Aker, the transaction will allow the businesses involved in the transfer to continue to grow under new ownership, as Aker concentrates its strategic efforts on its core oil and gas business. The all-cash transaction value is estimated at NOK 5.5 billion ($913 million), subject to closing adjustments, and the parties expect to complete the transaction during the first quarter of 2011.
Aker Solutions said the transaction is expected to have a positive net cash effect of approximately NOK 3.8 billion ($634 million), and a cash to treasury effect of approximately NOK 4.2 billion ($701 million). Net gain for Aker Solutions compared to book value of the businesses is estimated to be a total of NOK 2.4 billion ($400 million).
Øyvind Eriksen, executive chairman of Aker Solutions, said: “In August, Aker Solutions announced the decision to separate the P&C business area from the Aker Solutions Group. Since then, we have explored alternative methods of separation, including an IPO and public listing. As the alternatives matured over the recent weeks, a sale to Jacobs evolved as the preferred solution industrially as well as financially. This transaction provides a very good outcome for all parties. These businesses fit well with Jacobs and support their company’s ambitions for continued strong growth among its market segments, particularly in the energy and environmental; mining and metals; and onshore downstream process markets served by P&C.
“For Aker Solutions, this represents a further step in becoming much more streamlined and focused on our core oil and gas activities going forward.”
As a result of the transaction, about 3,500 of the roughly 30,000 people employed by Aker Solutions, will be transferred from Aker activities located across operations in the UK, The Netherlands, Germany, the United States, Canada, Peru, Chile, Australia, China and South Africa.
Jacobs Engineering Group reported 2010 revenues of about $10 billion. The U.S.-based company has more than 50,000 employees and approximately 160 offices in more than 20 countries, including operations in North America, the United Kingdom, mainland Europe, the Middle East, India, Australia, Africa and Asia.
Also in late December, KBR Inc. announced that it had acquired Roberts & Schaefer Co., a subsidiary of Elgin National Industries, and would integrate it into KBR’s Infrastructure, Government and Power Business Group. The transaction closed on December 21, 2010.
Roberts & Schaefer provides engineering, procurement and construction (EPC) services for bulk material handling and processing systems used in the mining and minerals, petroleum coke and aggregates sectors. In addition to its Chicago headquarters, Roberts & Schaefer has offices in Salt Lake City, Utah, USA; Brisbane, Australia; Gliwice, Poland; Jakarta, Indonesia; and Ahmedabad, India. Roberts & Schaefer also includes Soros, a provider of material handling solutions for port and marine applications and Separator, providing services to coal, minerals and power markets in Eastern Europe.
KBR is a global engineering, construction and services company supporting the energy, hydrocarbon, government services, minerals, civil infrastructure, power and industrial markets.
