Regal Beloit Corporation (NYSE: RBC) and Rexnord Corporation (NYSE: RXN) reported a definitive agreement where Rexnord will separate is PMC (Process & Motion Control) segment in a tax free spin off to Rexnord shareholders and then combine 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. A potential dividend to Regal shareholders and a ownership adjustment to Rexnord shareholders are sized at closing to ensure that RMT ownership requirements are met. The water management platform will be retained by Rexnord shareholders.
“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.”