Regal Beloit Corporation announced moving a step forward in the deal with Rexnord Corporation signed in February 2021. Regal Beloit received shareholders’ approval for the issuance of common shares in a special meeting held yesterday.
The deal signed calls for the combination of Regal Beloit’s operations with Rexnord’s Process & Motion Control (“PMC”) segment. The transaction has been valued at $3.69 billion.
Regal Beloit’s shares lost 1.15% yesterday, ending the trading session at $147.70.
Inside the Headlines
Along with the approval for share issuance, Regal Beloit’s shareholders gave a green signal to make changes in the company’s Articles of Incorporation. This will enable it in changing the company’s name and increasing authorized shares. The new name proposed for the company is ‘Regal Rexnord Corporation’.
This August, Regal Beloit communicated its planned changes, which are subjected to the closing of the above-mentioned deal. Regal Beloit intends on grouping its power transmission business — including its existing Power Transmission Solutions (“PTS”) segment and Rexnord’s PMC segment — under Motion Control Solutions (“MCS”) segment. The MCS segment will be led by Kevin J. Zaba and its president, Integration will be Jerry Morton. While Zaba is currently capacitated as president of PMC, Morton is the current president of PTS.
Subject to the fulfillment of closing conditions, Regal Beloit anticipated closing the deal with Rexnord early in fourth-quarter 2021.
A brief discussion on the deal is provided below:
The transaction is anticipated to boost Regal Beloit’s product line and enhance its position as a major provider of power transmission solutions. The transaction will also strengthen its market presence and shareholder value. As noted, within three years of the completion, the deal is likely to generate cost savings of $120 million for Regal Beloit. Adjusted earnings before interest, tax, depreciation and amortization are expected to be $1 billion for 2022.
Post the deal completion, Regal Beloit’s shareholders will own 61.4% of the combined entity (“New Regal”), while the rest 38.6% will be owned by Rexnord’s shareholders.
Zacks Rank, Estimates and Price Performance
With a market capitalization of $6.1 billion, Regal Beloit currently carries a Zacks Rank #2 (Buy). In 2021, the company anticipates benefiting from strengthening end markets and margin improvements. It expects adjusted earnings per share of $8.70-$9.00, suggesting growth of 53% (at the mid-point) from the previous year’s reported number. Sales are expected to grow in high-teens on a year-over-year basis.
In the past three months, the company’s shares have gained 5.2% compared with the industry’s growth of 6%.
Image Source: Zacks Investment Research
Meanwhile, the Zacks Consensus Estimate for its earnings is pegged at $8.85 for 2021 and $9.68 for 2022, reflecting growth of 14.2% and 13.9% from the respective 60-day-ago figures. Earnings estimates for the third quarter are pegged at $2.34, increasing 21.9% from the 60-day-ago figure.