Regal Beloit, which has operations with Valparaiso, is merging with the power transmission manufacturing arm of Rexnord Corp. in a deal valued at $3.69 billion.
Milwaukee-based Rexnord is spinning off its Process & Motion Control segment, which will be combined with Regal in a tax-free Reverse Morris Trust transaction.
Regal Beloit, which is closing the former McGill aircraft bearing factory in Valparaiso and will keep open McGill's former Lafayette Street office, said the deal will shift its portfolio to where power transmission and motors will account for 85% of its business.
"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," Regal CEO Louis Pinkham said. "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."
Regal Beloit decided last year to close a 110-year-old factory in Valparaiso, laying off 160 to 170 workers, after workers went on strike because of high out-of-pocket health care bills. It has been winding down operations there as it consolidates its manufacturing at a non-union factory in Monticello downstate. It is maintaining a product return location and research and development center in Valparaiso.
The company said the new deal will increase its geographic and end-market diversity, accelerate new product development, improve its digital services and create value for shareholders. The consolidated is expected to result in an annual cost savings of $120 million per year.
"This transaction provides clear and compelling value for Rexnord shareholders through ownership in a combined company with enhanced scale and significant growth opportunities," said Todd Adams, chairman, president and CEO of Rexnord. "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 will continue to maintain its water management business that will remain based in Milwaukee.
Regal Beloit will remain headquartered in Beloit, Wisconsin.
The combined PTS and PMC business will adopt the Rexnord name and be headquartered in Milwaukee. Regal expects it will continue to maintain, invest in and grow its presence in Florence, Kentucky, which will remain a strategic site.
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