Switzerlandâ€™s ABB (NYSE:ABB) unveiled a $3.1 billion deal on Tuesday to acquire U.S. industrial motors maker Baldor Electric (NYSE:BEZ) for a premium of 41%.
The move will allow ABB to penetrate the North American market as it attempts to become a global leader in industrial motion.
ABB said it will pay $63.50 in cash for each Baldor share, a 41% premium on the companyâ€™s closing price on Monday. Including $1.1 billion of debt, the total transaction is worth $4.2 billion.
â€śBaldor is a great company with an extremely strong brand in the world's largest industrial market," ABB CEO Joe Hogan said in a statement.
ABB said it sees the deal creating annual cost synergies and global revenue synergies of at least $110 million each. The companies expect the deal will close in the first quarter and add to ABBâ€™s bottom line in its first year.
As part of the deal, ABB will locate its North American motor and generator business headquarters to Fort Smith, Ark., the home of Baldor.
â€śWe are confident that the combined global platform will be well positioned to capitalize on meaningful growth opportunities in the future,â€ť Baldor CEO John McFarland said.
McFarland plans to stay with the combined business to â€śsupport a successful integration.â€ť
Baldorâ€™s stock climbed 40.17% to $63.23 on Tuesday morning. In a possible show of support, ABBâ€™s stock didnâ€™t sell off in the wake of the deal, rising 0.10% to $19.59.