BELOIT, Wis.
and MILWAUKEE, Feb. 16, 2021
/PRNewswire/ -- Regal Beloit Corporation (NYSE: RBC) and
Rexnord Corporation (NYSE: RXN) today announced that they have
reached a definitive agreement whereby Rexnord will separate its
Process & Motion Control ("PMC") segment by way of a tax-free
spin-off to Rexnord shareholders and then immediately combine it
with Regal in a Reverse Morris Trust ("RMT") transaction. Regal
shareholders will own 61.4% and Rexnord shareholders will own 38.6%
of the combined entity ("New Regal"), before a potential dividend
to Regal shareholders and a corresponding ownership adjustment to
Rexnord shareholders, sized at closing to ensure that RMT ownership
requirements are met. Rexnord shareholders will continue to own
100% of the businesses' Water Management platform.
With the addition of PMC, Regal's 2020 pro forma revenue was
approximately $4.1 billion with
Adjusted EBITDA of $740 million,
excluding $120 million in annualized
cost synergies expected to be achieved by year three after closing.
The pro forma 2020 EBITDA margin was approximately 18%.
The transaction combines Regal and PMC's best-in-class power
transmission portfolios to drive innovation in industrial power
transmission and motion control solutions through superior
engineering, technology, and manufacturing capabilities. PMC is a
world-class provider of specialized, highly-engineered power
transmission components and solutions, with a strong portfolio of
Industrial Internet of Things ("IIOT") solutions. The transaction
expands Regal's portfolio, customer reach, and product diversity
while creating shareholder value through enhanced growth and
substantial cost synergies.
"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," said Regal CEO,
Louis Pinkham. "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."
"We have long admired PMC's products and capabilities,
highly-regarded brands, and talented team. Importantly, Regal and
PMC are a terrific cultural fit with a shared commitment to
integrity, customer success, continuous improvement, and a passion
to win. We are confident these shared values and complementary
business structures will help facilitate a seamless transition and
fuel our continued success."
Todd Adams, Chairman, President
and CEO of Rexnord, commented, "This transaction provides clear
and compelling value for Rexnord shareholders through ownership in
a combined company with enhanced scale and significant growth
opportunities. 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's Water Management business will be
well-positioned to continue to drive differentiated growth as a
standalone business aligned around its distinct competitive
advantages and market dynamics."
Key Strategic & Financial Benefits
- Creates a premier player in industrial power
transmission with complete product portfolio across the entire
drive train. The combination with PMC fills gaps in Regal's PTS
portfolio, creates a more compelling partner for distributors, and
enables Regal to provide complete drive train solutions across all
major applications for customers. In addition, the transaction
represents an attractive value proposition for both customers and
end users with enhanced service capability breadth, technology
content and domain expertise.
- Improves end market diversity. Creates new avenues for
growth through expanded focus outside of North America. Improves end market diversity,
with increased exposure to attractive high-growth end markets
including Renewable Energy, Food and Beverage, Automation,
Aerospace, and eCommerce. Regal's combined portfolio is expected to
be more balanced, with pro forma 2020 PTS comprising nearly 50% of
sales, reducing cyclicality and unlocking greater portfolio
flexibility.
- Accelerates R&D and digital service capabilities.
Combined R&D fuels the growth of next-generation products and
faster development of value-added features through enhanced
innovation and reinvestment. Provides opportunity to create
world-class IIOT and digital experience with the Perceptiv™
and DiRXN® platforms, providing innovative new solutions
for customers and end users.
- Substantial cost synergies of $120
million by year three, with $70
million realized in year one. Expected synergies to be
driven by procurement, distribution efficiencies, footprint
rationalization, and SG&A savings. Regal plans to continue
robust investment in technology and innovation.
- Provides significant immediate and long-term value creation
and financial benefits. The transaction provides attractive
ROIC and is expected to be accretive to cash EPS in year one after
closing. In addition, assuming the mid-point of the expected
adjustment mechanism range (described below), Regal shareholders
would be expected to receive a dividend of ~$7 per share. The transaction is expected to
leave Regal with a strong balance sheet.
- Unites aligned cultures with deep commitment to 80/20 and
LEAN principles. Shared cultures focused on serving customers
and driving efficiency. Talent infusion expected to accelerate
80/20, LEAN, IIOT, and new product development initiatives.
Governance and Locations
Upon closing, Regal will be led by its existing Board of
Directors with the addition of two new directors from the Rexnord
board of directors, mutually agreed upon by Regal and Rexnord.
Rakesh Sachdev will continue as
non-Executive Chairman of the Board. Regal's CEO, Louis Pinkham, will lead the combined corporate
entity, which will continue to be headquartered in Beloit, Wisconsin.
The combined PTS and PMC business will adopt the Rexnord name
and be headquartered in Milwaukee,
Wisconsin. Regal expects it will continue to maintain,
invest in, and grow its presence in Florence, Kentucky, which will remain a
strategic site.
Rexnord Chairman, President and CEO, Todd Adams, will continue to lead the Water
Management business, which plans to remain headquartered in
Milwaukee, Wisconsin.
Transaction Structure and Closing Conditions
Under the terms of the agreement, which has been unanimously
approved by the Boards of Directors of both companies, Regal
shareholders will own 61.4% and Rexnord shareholders 38.6% in New
Regal, before a potential dividend to Regal shareholders and a
corresponding ownership adjustment for Rexnord shareholders.
The transaction is structured as an RMT and is expected to be
tax-efficient to Regal and Rexnord shareholders for U.S. federal
income tax purposes. Significant shareholder overlap between Regal
and Rexnord shareholders, and the adjustment mechanism, will ensure
that the RMT threshold of greater-than-50% ownership by Rexnord
shareholders in New Regal, after factoring overlapping
shareholders, is met in all circumstances.
Based on current information on the size and characteristics of
overlapping ownership, there is an expected dividend to Regal
shareholders, with a corresponding ownership adjustment for Rexnord
shareholders. Based on current information, we expect the dividend
to be in the range of $100 to
$500 million with a mid-point of
$300 million. That midpoint
corresponds to ownership in New Regal of 60.0% for Regal
shareholders and 40.0% for Rexnord shareholders post dividend.
The transaction values PMC at $3.69
billion1, representing 14.2x 2020 Adjusted
EBITDA, or 9.7x after factoring run-rate cost synergies. The
transaction is subject to regulatory approvals, Regal and Rexnord
shareholder approvals, and customary closing conditions, and is
expected to close in the fourth quarter of 2021.
Conference Call and Investor Information
Regal and Rexnord will jointly hold a conference call to discuss
the transaction at 7:30 AM CT
(8:30 AM ET) on Tuesday, February 16, 2021. To listen to the live
audio and view the presentation during the call, please visit
Regal's Investor website: https://investors.Regalbeloit.com. To
listen by phone or to ask the presenters a question, dial
1-888-317-6003 (U.S. callers) or + 1-412-317-6061 (international
callers) and enter 9152907# when prompted.
A webcast replay will be available at the link above, and a
telephone replay will be available at 1-877-344-7529 (U.S. callers)
or + 1-412-317-0088 (international callers), using a replay access
code of 10152538#. Both will be accessible for three months after
the earnings call.
A copy of the investor presentation will be made available on
Regal and Rexnord investor relations websites in advance of the
conference call.
Fourth Quarter and Full Year 2020 Earnings Announcements
Regal and Rexnord separately announced their Fourth Quarter and
Full Year 2020 earnings today and will be hosting separate earnings
conference calls, at 9:00 AM CT
(10:00 AM ET) and 10:00 AM CT (11:00 AM
ET), respectively. Details of these calls can be found in
the companies' separate earnings press releases and on their
respective investor relations websites.
Advisors
Barclays and Incentrum Group are serving as financial advisors
to Regal, and Sidley Austin LLP is serving as legal counsel.
Barclays is also providing Regal with committed financing for the
transaction. Citi and Evercore are serving as financial advisors to
Rexnord, and Morgan, Lewis & Bockius LLP is serving as legal
counsel. Credit Suisse is providing Rexnord with committed
financing for the transaction.
About Regal
Regal Beloit Corporation (NYSE: RBC) is a global leader in the
engineering and manufacturing of electric motors and controls,
power generation, and power transmission products, serving
customers throughout the world. We create a better tomorrow by
developing and responsibly producing energy-efficient products and
systems.
The Company is comprised of four operating segments: Commercial
Systems, Industrial Systems, Climate Solutions and Power
Transmission Solutions. Regal is headquartered in Beloit, Wisconsin and has manufacturing,
sales, and service facilities worldwide. For more information,
visit RegalBeloit.com.
About Rexnord
Headquartered in Milwaukee,
Wisconsin, Rexnord is comprised of two strategic platforms,
Process & Motion Control and Water Management, with
approximately 6,400 employees worldwide.
The Process & Motion Control platform designs, manufactures,
markets, and services specified, highly engineered mechanical
components used within complex systems. The Water Management
platform designs, procures, manufactures and markets products that
provide and enhance water quality, safety, flow control and
conservation. Additional information about the Company can be found
at www.rexnordcorporation.com.
Additional Information
This communication does not constitute an offer to buy, or a
solicitation of an offer to sell, any securities of Regal Beloit
Corporation ("Regal"), Rexnord Corporation ("Rexnord") or Land
Newco, Inc. ("Land") In connection with the proposed transaction,
Regal and Land will file registration statements with the SEC
registering shares of Regal common stock and Land common stock in
connection with the proposed transaction. Regal's registration
statement will also include a joint proxy statement and prospectus
relating to the proposed transaction. Rexnord shareholders are
urged to read the joint proxy statement/prospectus-information
statement that will be included in the registration statements and
any other relevant documents when they become available, and Regal
shareholders are urged to read the joint proxy
statement/prospectus-information statement and any other relevant
documents when they become available, because they will contain
important information about Regal, Rexnord, Land and the proposed
transaction. The joint proxy statement/prospectus-information
statement and other documents relating to the proposed transaction
(when they become available) can also be obtained free of charge
from the SEC's website at www.sec.gov. The joint proxy
statement/prospectus-information statement and other documents
(when they are available) can also be obtained free of charge from
Rexnord upon written request to Rexnord Corporation, Investor
Relations, 511 Freshwater Way, Milwaukee,
WI 53204, or by calling (414) 643-3739 or upon written
request to Regal Beloit Corporation, Investor Relations, 200 State
Street, Beloit, WI 53511 or by
calling (608) 364-8800.
Forward Looking Statements
This communication contains forward-looking statements, within
the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, which reflect Regal's current estimates,
expectations and projections about Regal's future results,
performance, prospects and opportunities. Such forward-looking
statements may include, among other things, statements about the
proposed acquisition of Rexnord's PMC business (the "PMC
Business"), the benefits and synergies of the proposed transaction,
future opportunities for Regal, the PMC Business and the combined
company, and any other statements regarding Regal's, the PMC
Business's or the combined company's future operations, anticipated
business levels, future earnings, planned activities, anticipated
growth, market opportunities, strategies, competition and other
expectations and estimates for future periods. Forward-looking
statements include statements that are not historical facts and can
be identified by forward-looking words such as "anticipate,"
"believe," "could," "estimate," "expect," "intend," "plan," "may,"
"should," "will," "would," "project," "forecast," and similar
expressions. These forward-looking statements are based upon
information currently available to Regal and are subject to a
number of risks, uncertainties, and other factors that could cause
Regal's, the PMC Business's or the combined company's actual
results, performance, prospects, or opportunities to differ
materially from those expressed in, or implied by, these
forward-looking statements. Important factors that could cause
Regal's, the PMC Business's or the combined company's actual
results to differ materially from the results referred to in the
forward-looking statements Regal makes in this communication
include: the possibility that the conditions to the consummation of
the transaction will not be satisfied; failure to obtain, delays in
obtaining or adverse conditions related to obtaining shareholder or
regulatory approvals or the IRS ruling to be sought in connection
with the proposed transaction; changes in the extent and
characteristics of the common shareholders of Rexnord and Regal and
its effect pursuant to the merger agreement for the transaction on
the number of shares of Regal common stock issuable pursuant to the
transaction, magnitude of the dividend payable to Regal
shareholders pursuant to the transaction and the extent of
indebtedness to be incurred by Regal in connection with the
transaction; the ability to obtain the anticipated tax treatment of
the transaction and related transactions; risks relating to any
unforeseen changes to or the effects on liabilities, future capital
expenditures, revenue, expenses, synergies, indebtedness, financial
condition, losses and future prospects; the possibility that Regal
may be unable to achieve expected synergies and operating
efficiencies in connection with the transaction within the expected
time-frames or at all and to successfully integrate the PMC
Business; expected or targeted future financial and operating
performance and results; operating costs, customer loss and
business disruption (including, without limitation, difficulties in
maintain relationships with employees, customers, clients or
suppliers) being greater than expected following the transaction;
failure to consummate or delay in consummating the transaction for
other reasons; Regal's ability to retain key executives and
employees; risks associated with litigation related to the
transaction; the continued financial and operational impacts of and
uncertainties relating to the COVID-19 pandemic on customers and
suppliers and the geographies in which they operate; uncertainties
regarding the ability to execute restructuring plans within
expected costs and timing; actions taken by competitors and their
ability to effectively compete in the increasingly competitive
global electric motor, drives and controls, power generation and
power transmission industries; the ability to develop new products
based on technological innovation, such as the Internet of Things,
and marketplace acceptance of new and existing products, including
products related to technology not yet adopted or utilized in
geographic locations in which we do business; fluctuations in
commodity prices and raw material costs; dependence on significant
customers; risks associated with global manufacturing, including
risks associated with public health crises; issues and costs
arising from the integration of acquired companies and businesses
and the timing and impact of purchase accounting adjustments;
Regal's overall debt levels and its ability to repay principal and
interest on its outstanding debt, including debt assumed or
incurred in connection with the proposed transaction; prolonged
declines in one or more markets, such as heating, ventilation, air
conditioning, refrigeration, power generation, oil and gas, unit
material handling or water heating; economic changes in global
markets, such as reduced demand for products, currency exchange
rates, inflation rates, interest rates, recession, government
policies, including policy changes affecting taxation, trade,
tariffs, immigration, customs, border actions and the like, and
other external factors that Regal cannot control; product liability
and other litigation, or claims by end users, government agencies
or others that products or customers' applications failed to
perform as anticipated, particularly in high volume applications or
where such failures are alleged to be the cause of property or
casualty claims; unanticipated liabilities of acquired businesses;
unanticipated adverse effects or liabilities from business exits or
divestitures; unanticipated costs or expenses that may be incurred
related to product warranty issues; dependence on key suppliers and
the potential effects of supply disruptions; infringement of
intellectual property by third parties, challenges to intellectual
property, and claims of infringement on third party technologies;
effects on earnings of any significant impairment of goodwill or
intangible assets; losses from failures, breaches, attacks or
disclosures involving information technology infrastructure and
data; cyclical downturns affecting the global market for capital
goods; and other risks and uncertainties including, but not
limited, to those described in Regal's Annual Report on Form 10-K
on file with the Securities and Exchange Commission and from time
to time in other filed reports including Regal's Quarterly Reports
on Form 10-Q. For a more detailed description of the risk factors
associated with Regal, please refer to Regal's Annual Report on
Form 10-K for the fiscal year ended December 28, 2019 on file with the Securities and
Exchange Commission and its Quarterly Report on Form 10-Q for the
period ended September 26, 2020 and
subsequent SEC filings. Shareholders, potential investors, and
other readers are urged to consider these factors in evaluating the
forward-looking statements and are cautioned not to place undue
reliance on such forward-looking statements. The forward-looking
statements included in this communication are made only as of the
date of this communication, and Regal undertakes no obligation to
update any forward-looking information contained in this
communication or with respect to the announcements described herein
to reflect subsequent events or circumstances.
Participants in the Solicitation
This communication is not a solicitation of a proxy from any
security holder of Regal. However, Rexnord, Regal and certain of
their respective directors and executive officers may be deemed to
be participants in the solicitation of proxies from shareholders of
Rexnord and Regal in connection with the proposed transaction under
the rules of the SEC. Information about the directors and executive
officers of Rexnord may be found in its Annual Report on
Form 10-K filed with the SEC on May 12, 2020 and its definitive proxy statement
relating to its 2020 Annual Meeting filed with the SEC on
June 5, 2020. Information about the
directors and executive officers of Regal may be found in its
Annual Report on Form 10-K filed with the SEC on
February 26, 2020, and its definitive proxy statement relating
to its 2020 Annual Meeting filed with the SEC on March 19, 2020.
NON-GAAP MEASURES AND OTHER DEFINITIONS
In this news release, we disclose the following non-GAAP
financial measures: adjusted EBITDA, EBITDA margin, return on
invested capital (ROIC) and cash earnings per share (EPS). As used
in this communication, we define: (i) "adjusted EBITDA" to mean:
earnings before interest, taxes, depreciation, acquisition related
amortization, acquisition related costs, restructuring and related
costs, stock-based compensation, asset impairment and other income
or charges that management does not consider to be directly related
to operating performance, (ii) "EBITDA margin" to mean: Adjusted
EBITDA as a percentage of net sales, (iii) "return on invested
capital" to mean: after-tax adjusted operating income before
amortization divided by invested capital and (iv) "cash earnings
per share" to exclude acquisition related amortization, acquisition
related costs, restructuring and related costs, asset impairment
and other income or charges that management does not consider to be
directly related to operating performance. Not all companies
use these terms in consistent ways and you should not assume that
the manner in which we use these terms is consistent with any other
company. This additional information is not meant to be
considered in isolation or as
a substitute for result of operations prepared and presented in
accordance with GAAP.
1 Includes $3.32
billion of Regal stock, priced at $128.82 using a 15-day VWAP, issued in the
transaction and the assumption of $370
million of net debt, and excludes a $73 million post-tax pension liability to be
assumed in the transaction.
View original
content:http://www.prnewswire.com/news-releases/regal-to-combine-with-rexnords-pmc-segment-creating-world-class-power-transmission-provider-301228824.html
SOURCE Regal Beloit Corporation; Rexnord Corporation