U.S. Markets closed

RBC Raises Debt to Fund Acquisition

Zacks Equity Research

Regal Beloit Corporation (NYSE:RBC - News) recently issued senior unsecured notes worth $423 million in a private placement. In addition, the company expects to issue senior unsecured notes of $77 million in the near term.

The company will divide the issue into seven portions, with maturity ranging from seven to twelve years and fixed interest rates ranging from 4.09% to 5.09%.

Regal Beloit intends to utilize the proceeds to fund the acquisition of Electrical Products Company ("EPC") from A.O. Smith Corporation (NYSE:AOS - News).

Last year, the company agreed to acquire 100% of the stock and assets of EPC from A.O. Smith for approximately $875 million. Of the total consideration, $700 million will be paid in cash and balance in shares of Regal Beloit common stock.

Based in Tipp City, Ohio, EPC manufactures and sells a full line of motors for hermetic, pump, distribution, heating, ventilation and air conditioning (:HVAC) and general industrial applications.

Management believes that EPC's product portfolio is complementary  to Regal Beloit's and has targeted synergies of $30 million–$40 million, spanning over three to four years from this acquisition.

As a consequence of the merger, the company expects to add approximately $700 million to the top line and increase earnings per share (excluding one-time items) in the first full year following the acquisition.

Regal Beloit continues acquiring businesses with its focus on energy efficiency technology, strengthening its geographic footprint and offering a synergistic fit.

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

Zacks Investment Research

More From Zacks.com