Zacks_Analysts' Blog : Regal Beloit Proceeds with Acquisition - Analyst Blog

Regal Beloit Corporation (RBC) has received the green signal from the U.S. Department of Justice to proceed with the acquisition of 100% of the stock and assets of Electrical Products Company ("EPC") from A.O. Smith Corporation (AOS).

Based in Tipp City, Ohio, EPC manufactures and sells a full line of motors for hermetic, pump, distribution, heating, ventilation and air conditioning (HVAC) and general industrial applications.

In order to obtain the above approval, Regal Beloit had to comply with the conditions of antitrust settlement. Thus, the company entered into an agreement with SNTech Inc. to dispose its existing U.S. focused pool and spa motor business, excluding the pool and spa motor business of EPC.

The company expects to close the acquisition of EPC and the divesture of U.S. focused pool and spa motor business by August 22, 2011.

Furthermore, Regal Beloit will sell EPC draft inducer designs, which are under development. The Justice Department believes that without these divestitures, the acquisition would result in higher prices, lower quality products, less customer service and less innovation.

Regal Beloit recently issued senior unsecured notes in a private placement to fund the acquisition of EPC.

Last year, the company had agreed to acquire 100% of the stock and assets of EPC for approximately $875 million. The total consideration for the acquisition now comprises $700 million of cash and approximately $175 million in shares of Regal Beloit common stock.

As a consequence of the merger, the company expects to add approximately $700 million to the top line and increase earnings per share (excluding one-time items) in the first full year following the acquisition.

This acquisition will be significant for the company, as it would enable customers with new energy-saving products resulting in meaningful synergies and expansion of Regal Beloit’s global footprint.

Headquartered in Beloit, Wisconsin, Regal Beloit manufactures mechanical and electrical motion control and power generation products.