Regal Beloit Corp. (NYSE: RBC), Beloit, Wisconsin, and Rexnord Corp. (NYSE: RXN), Milwaukee, Wisconsin, on Tuesday announced a $3.7 billion deal in which Rexnord will separate its Process & Motion Control segment via a tax-free spin-off to its shareholders and then immediately combine it with Regal in a Reverse Morris Trust transaction.
Regal shareholders will own 61.4% and Rexnord shareholders will own 38.6% of the combined entity (the company’s placeholder name is “New Regal”), before a potential dividend to Regal shareholders and a corresponding ownership adjustment to Rexnord shareholders, sized at closing to ensure that RMT ownership requirements are met. Rexnord shareholders will continue to own 100% of the businesses’ Water Management platform.
With the addition of PMC, Regal’s 2020 pro forma revenue was approximately $4.1 billion with Adjusted EBITDA of $740 million, excluding $120 million in annualized cost synergies expected to be achieved by year three after closing. The pro forma 2020 EBITDA margin was approximately 18%.
The companies, in a press release, said “the transaction combines Regal and PMC’s best-in-class power transmission portfolios to drive innovation in industrial power transmission and motion control solutions through superior engineering, technology, and manufacturing capabilities.”
“This transformative combination brings together two highly complementary businesses, creating a premier provider of power transmission products, poised to deliver enhanced value for our customers, associates, and shareholders,” said Regal CEO, Louis Pinkham. “Combining with PMC accelerates our transformation momentum and is an important step towards our vision to accelerate profitable growth. We believe this transaction will create meaningful value for customers by providing comprehensive solutions across the entire industrial drive train, increased portfolio and reach, and an enhanced presence in diverse and attractive end markets and geographies. Shareholders will benefit from compelling value creation and financial benefits, including enhanced growth, cost synergy-driven margin expansion, attractive ROIC, and earnings accretion.”
Added Todd Adams, chairman, president and CEO of Rexnord: “This transaction provides clear and compelling value for Rexnord shareholders through ownership in a combined company with enhanced scale and significant growth opportunities. Regal is committed to investing in the continued growth of its power transmission business, and we are confident the PMC platform and team are a perfect fit to accelerate their strategy. Rexnord’s Water Management business will be well-positioned to continue to drive differentiated growth as a standalone business aligned around its distinct competitive advantages and market dynamics.”