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ABB to Sell Dodge Business to RBC Bearings for $2.9 Billion

This content was published on July 26, 2021 - 22:14

(Bloomberg) -- ABB Ltd. agreed to sell its mechanical power transmission business to RBC Bearings Inc. as Chief Executive Officer Bjoern Rosengren swiftly overhauls the Swiss industrial giant.

RBC Bearings will pay $2.9 billion in cash to buy the Dodge unit, ABB said in a statement Monday, confirming an earlier Bloomberg News report. Dodge also drew interest from suitors including Schaeffler AG and Timken Co., people familiar with the sale process said earlier.

Shares of RBC Bearings jumped as much as 21% in New York trading Monday, the biggest intraday jump since March 2020, to hit a record high. ABB shares gained 0.1% in Zurich.

The deal ranks as the biggest acquisition by far made by RBC Bearings and will boost its offerings outside the aerospace industry, which has been hit hard by the pandemic. RBC Bearings expects the purchase to increase its earnings per share, excluding some items, by as much as 60% in the first full financial year after the deal closes.

“The sheer size and multiple of this transaction is to an extent eye-opening,” given the conservative nature of RBC Bearings management, Truist Securities analyst Michael Ciarmoli wrote in a research note Monday.

ABB announced in November that it would explore options for the Dodge unit as well as its turbocharging and power-conversion businesses. The sale indicates Rosengren is making headway on revamping ABB’s conglomerate structure after taking the helm last year, in the wake of the company coming under pressure from investors including Cevian Capital to raise profitability.

Dodge’s products include mounted bearings, enclosed gearing and bushings for industrial applications. ABB acquired the business as part of its 2011 purchase of Baldor Electric Co.

Based in Oxford, Connecticut, and led by industry veteran Michael J. Hartnett, RBC Bearings makes bearings, control rods, couplings and other parts for the aerospace, construction and mining industries.

Dodge has roughly 1,500 employees globally with revenues of about $600 million in the twelve months ending June 30, of which more than 90% were generated in the Americas, ABB said.

The deal is expected to close by the end of the year, according to Monday’s statement. ABB worked with JPMorgan Chase & Co. on the transaction, while Goldman Sachs Group Inc. advised RBC Bearings and provided committed financing.

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ABB’s CEO Rosengren said last week he hoped to sign a deal for Dodge “within a couple of weeks.” He also said an initial public offering of its electric-vehicle charging business could be readied for the fourth quarter and move ahead in early 2022. The separation of the turbocharger division has already begun and a possible spinoff could happen in the second quarter of next year.

ABB plans to use the proceeds from the sale of Dodge for “organic growth, pay a rising sustainable dividend per share and make value-creating acquisitions,” Rosengren said in the statement. “We will give an update on our plans for the turbocharging exit and possible listing of our e-mobility division in due course.”

The engineering giant last week raised its full-year guidance on revenue growth to about 10% from the previous forecast of 5% or more.

(Updates with additional detail from fourth paragraph)

©2021 Bloomberg L.P.

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