Regal Beloit Closes EPC Acquisition

Regal Beloit Corporation (RBC - Snapshot Report) has closed its previously announced acquisition of 100% of the stock and assets of Electrical Products Company ("EPC") from A.O. Smith Corporation (AOS - Snapshot Report) for approximately $875 million.

The portion involving EPC’s activities in China was escrowed pending administrative approvals, which are expected shortly.

In order to get the consent of acquisition from the U.S. Department of Justice (DoJ), Regal Beloit agreed to divest its existing U.S. focused pool and spa motor business, excluding the pool and spa motor business of EPC.

The company will also dispose its EPC draft inducer designs, which are under development.

The DoJ asserted that these divestures would ease antitrust concerns about higher prices, lower quality, sub-par customer service and less innovation.

The acquisition, which was declared last year, was delayed as management was trying to seek confirmation from the DOJ for the acquisition.

Per the acquisition agreement, Regal Beloit paid approximately $700 million in cash and around $175 million worth of shares of Regal Beloit common stock.

Regal Beloit funded the acquisition through a senior unsecured notes issue in a private placement.

Management expects that EPC will increase revenues by approximately $700 million and will be EPS-accretive (excluding one-time items) in the first full year following the acquisition.

Electrical Products is a leader in the hermetic motor space and with this acquisition Regal Beloit expects to enter that territory. The acquisition of EPC will strengthen Regal Beloit’s presence in low-cost manufacturing locations and provide consolidation opportunities.

Headquartered in Beloit, Wisconsin, Regal Beloit manufactures mechanical and electrical motion control and power generation products.

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