Baldor Electric to acquire Rockwell Power Systems

Baldor has announced that it has signed a definitive agreement to acquire the Reliance Electric Company and certain of its affiliated companies (the "Power Systems business") of Rockwell Automation

Baldor Electric Company has announced that it has signed a definitive agreement to acquire the Reliance Electric Company and certain of its affiliated companies (the "Power Systems business") of Rockwell Automation.

Baldor will purchase 100% of the equity interest in the Power Systems business for US$1.8 billion, comprising US$1.75 billion in cash and approximately 1.6 million shares of Baldor common stock, with a market value of US$50 million, based on the Baldor volume weighted average stock price over the prior ten trading days.

The transaction is expected to be completed in the first quarter of 2007 and is subject to customary closing conditions and necessary regulatory approvals.

The combined company will be one of the leading North American manufacturers of industrial electric motors and power transmission products.

The Power Systems business, which markets its products under the Reliance Electric and Dodge brand names, complements the Baldor business in industrial electric motors, drives and generators.

"The Reliance and Dodge businesses are a great fit with our existing businesses," said John McFarland, Chairman and Chief Executive Officer of Baldor: "The Power Systems business will complement and add strength to the Baldor product line.

The Power Systems business, like Baldor, provides the best industrial products available in the marketplace and sells them to value-minded customers.

"Dodge products have been available for over 125 years, Reliance motors for over 100 years and Baldor motors for over 85 years.

These companies have a long history of customer preference and good profitability.

Baldor, Dodge and Reliance have strong reputations in the industrial marketplace.

This is a unique opportunity to build a stronger company for our customers, our employees and our shareholders".

Keith D Nosbusch, Chairman and Chief Executive Officer of Rockwell Automation, said: "Baldor is a great company with an outstanding management team.

I believe there is a compelling cultural and strategic fit between Baldor and our Reliance and Dodge businesses.

Both organizations have similar operating philosophies and are committed to treating employees with respect, delivering high quality products and providing exceptional service to our customers.

Power Systems will benefit significantly from ownership that is dedicated to investing on a global basis to create a leading motors and power transmission business".

This transaction has a number of benefits and opportunities for Baldor customers, Baldor shareholders, and the employees of both companies:.

* Adds approximately US$1 billion dollars in sales with margins higher than that in Baldor.

* Provides a manufacturing base in China for the Asian markets.

* Extends our product line into power transmission products and larger motors.

* Enables Baldor to provide a broader product offering and services to customers.

* Provides strong opportunities for synergies and cost savings in the combined businesses.

* Addition of the Power Systems management team increases the strength of our management group.

* Increases our manufacturing capability and flexibility.

* Broadens investor interest in Baldor.

As part of Rockwell Automation, the Power Systems segment generated approximately US$1 billion in revenue for the 12 months ending 30 September, 2006.

Baldor expects to realise annual pre-tax synergies of approximately US$30 million within three years mainly from the benefits of combined purchasing, working capital management, reduced overhead and increased productivity.

The transaction is expected to be approximately US$0.10 accretive to Baldor's earnings in the first full year.

Baldor has received a financing commitment from BNP Paribas to support the transaction and expects to finance the US$1.75 billion dollar cash consideration through a combination of debt and approximately US$350 million of equity or equity-linked securities.

Upon completion of the transaction, total debt is expected be approximately US$1.5 billion.

Leverage ratios are expected to decline significantly over the next three years to be in line with our peers as cash flow is generated and synergies are realised.

UBS Investment Bank is acting as the sole financial advisor to Baldor in the transaction.

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