ABB to buy Thomas & Betts for $3.9bn

The power and automation technology group ABB and North American low-voltage products company Thomas & Betts Corporation have agreed to a transaction in which ABB will acquire Thomas & Betts for $72 per share in cash or approximately $3.9bn.

The transaction doubles ABB’s addressable low-voltage products market to approximately $24bn in North America and enables distribution of Thomas & Betts products through ABB’s global network. With the deal, ABB gains access to Thomas & Betts’ network of more than 6000 distributor locations and wholesalers in North America.

The acquisition price represents a 24% premium to Thomas & Betts’ closing stock price on 27 Jan 2012 and a 35% premium to the volume weighted average stock price over the past 60 trading days. The transaction is subject to approval by Thomas & Betts shareholders as well as to customary regulatory approvals and is expected to close by the middle of 2012. The complementary combination of Thomas & Betts’ electrical components and ABB’s low-voltage protection, control and measurement products would create a broader low-voltage portfolio that can be distributed through Thomas & Betts’ network of more than 6000 distributor locations and wholesalers in North America, and through ABB’s well-established distribution channels in Europe and Asia.

“Because our products are complementary, we’ll go to market with one of the broadest offerings in the industry. That creates strong growth opportunities for both ABB and Thomas & Betts, and gives customers and distributors one-stop access to one of the widest ranges of low-voltage products,” said Joe Hogan, ABB’s CEO.

“This is another big step toward our goal of expanding our presence in the key North American market. The transaction clearly supports our 2015 growth and profitability targets, and meets all of our return-on-investment criteria for creating shareholder value.”

“This transaction delivers significant value to our shareholders and will enable Thomas & Betts to accelerate our global growth strategy,” said Thomas & Betts Chairman and CEO Dominic J Pileggi. Thomas & Betts employs approximately 9400 people and is estimated to report 2011 revenues of approximately $2.3bn and earnings before interest, taxes, depreciation and amortisation of approximately $390m. Its main business is the manufacture of low-voltage and ultralow-voltage electrical products such as connectors, conduits and fittings as well as wiring management products for the construction, industrial and utilities markets. These are complementary to the offering of ABB’s Low Voltage Products division, which includes products such as breakers and switches. In addition, Thomas & Betts has a leading logistics model with its distributors that allows simple, single invoicing and fast delivery of its full product scope. Thomas & Betts also supplies towers for electrical power transmission and has a business that produces heating, ventilation and air-conditioning units, both new to ABB but related to its core power and automation focus.

ABB has secured a $4bn, fully underwritten bridge financing commitment from Bank of America Merrill Lynch which will be repaid through a combination of cash and the issuance of debt. The transaction is expected to be accretive within the first year after it closes prior to one-time charges and implementation costs. ABB expects the transaction will deliver approximately $200m in annual synergies by 2016. The majority of cost synergies are expected to come from sourcing and purchasing efficiencies. Bank of America Merrill Lynch acted as financial adviser to ABB and will provide the bridge financing facility and Kirkland & Ellis LLP acted as legal advisor. Deutsche Bank Securities Inc acted as financial adviser to Thomas & Betts and Davis Polk & Wardwell LLP as legal advisor.