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RBC Bearings Stock Jumps On Acquiring ABB's DODGE Mechanical Power Transmission Business For $2.9B

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  • RBC Bearings Inc (NASDAQ: ROLL) has agreed to acquire the DODGE mechanical power transmission division (DODGE) of ABB Ltd (NYSE: ABB) for $2.9 billion in cash.

  • The purchase price represents 16.7x DODGE's adjusted EBITDA for the 12 months ended June 30, 2021.

  • DODGE operates across the construction and mining aftermarket, food & beverage, warehousing, and general machinery verticals. It generated revenue of ~$617 million and adjusted EBITDA of ~$174 million, with an adjusted EBITDA margin of 28%, for the 12 months ended June 30, 2021.

  • DODGE has roughly 1,500 employees worldwide and produces at six manufacturing sites, 5 in the U.S. and 1 in China.

  • RBC Bearings expects the acquisition to be immediately accretive to its cash EPS by ~40% to 60% in the first full fiscal year after close. It foresees cash EPS of $7.00 to $8.00 per share in the first full fiscal year.

  • It also expects annual pre-tax run-rate synergies of ~$70 million to $100 million by the fiscal year 2026.

  • A fully committed bridge facility supports the acquisition, and permanent financing includes an appropriate mix of debt and equity. The transaction is to close in Q4 of CY21.

  • It expects the solid cash flow of the combined business to pay down debt within five years.

  • RBC Bearings held cash and cash equivalents of $241.3 million as of April 3, 2021.

  • Price Action: ROLL shares are up 20.6% at $248.95, and ABB is up 0.61% at $36.92 during the market session the last check Monday.

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