RBC Bearings Inc. (Nasdaq: ROLL), Oxford, Connecticut, on Monday announced that it has agreed to acquire the Dodge mechanical power transmission division of Asea Brown Boveri Ltd. (ABB) for $2.9 billion.
The purchase price represents 16.7x Dodge’s adjusted EBITDA for the 12 months ended June 30, or 10.6x to 11.9x adjusted EBITDA when including estimated run-rate synergies.
Headquartered in Greenville, South Carolina, Dodge is a manufacturer of mounted bearings and mechanical products. The company generated revenue of approximately $617 million and adjusted EBITDA of approximately $174 million, representing an adjusted EBITDA margin of 28%, for the 12 months ended June 30.
“Today we are very pleased to announce the execution of an agreement between ABB and RBC Bearings to acquire Dodge,” said Michael J. Hartnett, RBC Bearings chairman, president and CEO. “The combination will enhance RBC Bearings’ capabilities, footprint, and customer base while increasing our access to Dodge’s attractive end markets. Our businesses are highly complementary, with Dodge bringing new offerings, new end markets, and more scale to the combined organization. The combined company will have an attractive position in the Aerospace, Defense and Industrial markets with a diversified client base and expansive geographic footprint. We look forward to welcoming Dodge’s talented team to RBC Bearings.”
Added ABB CEO Björn Rosengren: “We are delighted that Dodge has found an excellent new home with RBC Bearings, where it can continue its exciting growth story. This transaction further strengthens ABB’s balance sheet. In line with our capital allocation priorities, we plan to first use the proceeds from the transaction to fund organic growth, pay a rising sustainable dividend per share and make value-creating acquisitions.”
The acquisition is anticipated to be immediately accretive to RBC Bearings’ cash EPS by approximately 40% to 60% in the first full fiscal year after close. The company expects cash EPS to be in the range of $7.00 to $8.00 per share in the first full fiscal year. The acquisition is expected to generate annual pre-tax run-rate synergies of approximately $70 million to $100 million by fiscal year 2026.