A Long-Awaited Move From ABB

The idea that Swiss industrial giant ABB (NYSE: ABB) is making an acquisition is about as surprising as Thursday following Wednesday. ABB has been openly on the hunt for acquisitions for a few years now, and most of the surprises about the company's M&A activities have centered on deals that slipped away from the company. On Tuesday, though, ABB announced it had agreed to acquire Baldor Electric (NYSE: BEZ) in an all-cash deal.

The Deal
ABB is paying $63.50 in cash for each Baldor share, a 41% premium to Monday's closing price and a total deal value of $4.2 billion. That is quite an impressive end to a recovery run in Baldor's stock that began back in March 2009 at a price below $11 a share. In fact, Baldor's shares had risen about 55% year-to-date, so ABB is certainly not stepping in and buying an asset that has been ignored by Wall Street. Moreover, at about 14 times trailing EBITDA, ABB certainly does not seem to be underpaying for this company.

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