Rexnord Finds A Good Deal For Shareholders And Shifts To A Water-Driven Future

 

Win-win transactions aren’t necessarily commonplace, but I think Rexnord (RXN) and Regal Beloit (RBC) found one, with the two companies intending to combine Rexnord’s Process and Motion Control (or PMC) business into Regal Beloit in a Reverse Morris Trust transaction that will see Rexnord shareholders own something around 38% to 39% of the combined company, while also owning shares in a new water infrastructure pure play.

Having recently written on Regal Beloit, I encourage readers to check out my thoughts on that company and how it stands to benefit from the PMC deal. For Rexnord shareholders, the benefits come not only with the value of the stake in an improved Regal Beloit, a short-cycle industrial with exposure to the post-pandemic recovery, HVAC, and industrial automation, but also the higher multiples that the Street typically awards water infrastructure companies.

Rexnord shares have done well since my last update, rising more than 50% on improving post-pandemic sentiment. No longer a laggard to the industrial sector, I do still see upside potential. There are still plenty of uncertainties that complicate the modeling process, but I believe Rexnord’s near-term fair value rises to over $50 with the Regal Beloit transaction and the probable post-deal re-rating.

 

Click the link to continue: 

Rexnord Finds A Good Deal For Shareholders And Shifts To A Water-Driven Future