World news: January 2012
ABB buys Thomas & Betts for $3.9bn to boost LV business
ABB is buying the North American low-voltage products manufacturer Thomas & Betts for around $3.9bn. It is ABB’s biggest deal since buying Baldor Electric last year for $4.2bn.
ABB says that combining Thomas & Betts’ electrical components business with its own LV protection, control and measurement products will create a broader LV portfolio that can be distributed through T&B’s network of more than 6,000 distributor locations and wholesalers in North America, and through ABB’s distribution channels in Europe and Asia.
T&B has a portfolio of more than 200,000 products marketed under more than 45 brand names. The combined product portfolio and enhanced distribution network will enable ABB to double its addressable market in North America to around $24bn. Globally, the deal will boost ABB`s accessible LV market ABB from $60bn to $85bn.
“Thomas & Betts is a well-run company with strong brands and excellent distribution channels in the world’s largest low-voltage products market,” says ABB CEO, Joe Hogan (above). “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.
“Strategically, it’s a great fit,” he adds. “This is another big step toward our goal of expanding our presence in the key North American market.”
Thomas & Betts, combined with ABB’s North American low-voltage products business, will become a new global business unit based at T&B`s existing headquarters in Memphis, Tennessee (above), and led by T&B’s chairman and CEO, Dominic Pileggi.
Thomas & Betts employs around 9,400 people and last year achieved revenues worth about $2.3bn, with earnings before interest, taxes, depreciation and amortisation of around $390m. Its main business is the manufacture of LV and ultra-LV electrical products, such as connectors, conduits and fittings, as well as wiring management products for the construction, industrial and utilities markets.
ABB says that T&B’s electrical products – which include terminals, test equipment, safety lighting and tools – complement its own LV products, such as circuit-breakers and switches. One area of overlap is in enclosures. Thomas & Betts is said to have good distribution logistics, allowing simple, single invoicing and fast delivery of products.
T&B also supplies towers for electrical power transmission and produces heating, ventilation and air conditioning systems. These two areas, which account for about 15% of its sales, are new to ABB but related to its core focus on power and automation.
About 78% of T&B’s electrical product sales are in North America, 14% in Europe, and 8% in the rest of the world. Some 45% of the sales are to industry, 39% to the construction sector, and 16% to utilities.
“This is a unique opportunity for ABB to grow in the largely untapped North American LV products market,” says Tarak Mehta (above), ABB’s executive committee member responsible for its LV Products division, into which Thomas & Betts will be integrated as a stand-alone business. “We plan to keep and build on Thomas & Betts’ strong brand and product names. We have complementary products that can be sold together already today and other products that will take some time to introduce to customers.”
ABB’s Low Voltage Products operation is the smallest of its four divisions, but the most profitable, with an operating margin of 19.9% on sales worth $1.36bn in the third quarter of 2011. At present, the Americas account for just 9% of its business, compared to 55% in Europe and 36% elsewhere. After the acquisition, 30% of the business will come from the Americas, 43% from Europe and 27% from elsewhere.
The US LV products market is expected to grow by 2.5–4% this year compared to 1–2% in Europe.
The acquisition is expected to close in the second quarter of 2012. ABB expects the deal to deliver about $200mn in annual synergies by 2016, mainly from sourcing and purchasing efficiencies.