In an effort to extend its market presence in North America, Switzerland-based ABB Ltd. (ABB) struck a deal with Thomas & Betts Corp. (TNB) to buy the company for $72 a share or $3.9 billion. The deal would allow ABB to double its addressable low-voltage products space to about $24 billion in North America.
The Swiss-based industrial electrical equipment maker stands to benefit from the deal by extending its presence geographically as well as product scope wise. The agreement would also mean that Thomas & Betts association of 6,000 odd distributors would be available for ABB. The deal will be funded from cash and debt with fully underwritten commitment from financial institutions.
The deal fits in well with the stated objective of ABB to expand geographically by 2015. Most importantly, annual synergies are expected to fetch about $200 million by the turn of 2016. The closing of the transaction is anticipated during the second quarter.
The deal would allow Thomas & Betts’ low-voltage products to be available throughout the world with the strong network of ABB. This is also expected to benefit the company for accelerating access to worldwide market.
The latest action would not only allow ABB’s total North American business to represent the size of the globe’s highest market, it would also help rebalance its most profitable units.
The current exposure for Thomas & Betts’ electrical product sales by end market is that 45 percent is derived from Industry, while 39 percent obtained from construction leaving 16 percent from Utilities.
Geographically, Thomas & Betts products are sold 78 percent in North America, 14 percent in Europe with the remaining 8 percent being sold rest of the world.
The products from both the companies are quite different, but are highly complementary. The total accessible market put together is pegged at around $85 billion. While ABB has accessible market size of $65 billion, Thomas & Betts accessible market size is $25 billion.
The North American total accessible market size estimated at around $24 billion with Thomas & Betts accessible market size of $11 billion and ABB’s $14 billion.
Based on 2011 full year projections, expected market growth in the Americas are 2 – 3 percent, 1 – 2 percent in Europe and 5 – 7 percent in Asia and Middle East.
The two companies put together could see compounded annual grow rate are in the range of 3 – percent for the period 2012 – 16 in worldwide market.
For the nine-month period ended September 2011, Thomas & Betts reported revenues of $1.69 billion. The company is scheduled to release its fourth quarter results on January 30.