BELOIT, Wis. - Regal Beloit Corp. announced that it has entered into an agreement to acquire 100 percent of the stock and assets of the Electrical Products Co. (EPC) from A.O. Smith Corp. EPC manufactures and sells a full line of motors for hermetic, pump, distribution, HVAC, and general industrial applications.

Total consideration for the transaction is approximately $875 million, including $700 million of cash and approximately $175 million in shares of Regal Beloit common stock. Regal Beloit expects the acquisition to add annual sales of over $700 million in the first full year following the acquisition and to be accretive in the first full year following the acquisition, excluding one-time transaction-related expenses and purchase accounting adjustments. The majority of these expenses will be incurred in the first quarter following the close of the transaction. Closing will be subject to customary regulatory approvals.

EPC is based in Tipp City, Ohio. Operations include motor manufacturing facilities in the United States, Mexico, China, and the United Kingdom.

Regal Beloit said this transaction represents the seventh announced acquisition for the company in 2010.

According to Regal Beloit, key attributes of the EPC transaction include: complementary product portfolio; leading technology for variable speed hermetic applications; patent portfolio with nearly 150 patents; expansion of the company’s global manufacturing capabilities; targeted synergies of $30 million to $40 million achieved over three to four years; and future tax benefits related to the deductibility of goodwill and intangible asset amortization, projected to have an estimated present value of at least $45 million to $55 million.

Henry Knueppel, CEO and chairman of Regal Beloit, said, “This is a defining acquisition for Regal Beloit. We believe that this acquisition achieves all three criteria of our acquisition strategy. Equally important, we are looking forward to welcoming the outstanding employees of EPC to our company. EPC adds exciting new technologies, enhances geographic presence, and drives significant synergies. Furthermore, the transaction is expected to be accretive, excluding non-recurring items and purchase accounting adjustments, the majority of which are expected to occur in the first quarter following the close of the transaction. This transaction provides us with a more complete product and technology portfolio, which will allow us to add value for our customers.”

Paul Jones, CEO and chairman of A.O. Smith, said, “Regal Beloit will be a tremendous steward for our business and we believe that Regal Beloit is a good cultural fit for the EPC organization. This transaction will benefit all of our stakeholders.”

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Publication date:12/27/2010