ABB Nears Deal for Thomas & Betts for About $4B

By Zachary R. Mider - Jan 30, 2012 7:00 AM GMT+0700

ABB Ltd. (ABBN), the world’s largest provider of power-transmission gear, is nearing an agreement to buy Thomas & Betts Corp., a maker of electrical connectors, for about $4 billion in cash, a person with knowledge of the plan said.

ABB, based in Zurich, may announce a deal as soon as today, said the person, who spoke on condition of anonymity because the negotiations are private. The talks for Thomas & Betts, whose market value was $3.02 billion based on its Jan. 27 closing price of $57.95 a share, may still break down.

Thomas & Betts, based in Memphis, Tennessee, would be the second large acquisition for ABB under Chief Executive Officer Joe Hogan, who joined in 2008 from General Electric Co. (GE) He bolstered ABB in the U.S. with the January 2011 purchase of Baldor Electric Co. for about $3.1 billion. That deal added industrial motors and drives and gave ABB heft in automation, where it competes with Siemens AG. (SIE)

Spokespeople for ABB in Zurich didn’t respond to messages seeking comment yesterday. A phone message at the office of Tricia Bergeron, an investor relations representative for Thomas & Betts, wasn’t answered. The Wall Street Journal reported the talks yesterday, citing unidentified people familiar with the situation.

Thomas & Betts was founded in 1898 as a sales agency for electrical wires and raceways, and its products are used in the telecommunications, construction and power utility industries. Now it makes cable ties, connectors and steel boxes that house electrical wiring, generating 2010 sales of $2 billion.

Multiples

The shares of Thomas & Betts have climbed by more than half since August. They haven’t returned to the record closing high of $64 set in 1998.

At the Jan. 27 price of $57.95, Thomas & Betts traded at about 15 times analysts’ estimates for 2012 profit, data compiled by Bloomberg show, up from as little as 10 times in September. Electrical equipment makers Hubbell Inc. and Amphenol Corp. fetch multiples of about 15 times and 16 times forward earnings respectively, the data show.

Thomas & Betts is scheduled to release its fourth-quarter earnings report today. For 2010, the company said industrial and construction customers accounted for about 76 percent of its sales, with utilities making up the rest. The U.S. and Canada generated about 81 percent of its sales.

ABB was created in 1988 from the combination of Asea AB of Sweden and Switzerland’s BBC Brown Boveri. Investor AB, the Swedish Wallenberg family’s holding company, remains ABB’s largest shareholder, with a stake of about 7.2 percent, data compiled by Bloomberg show.

Hogan Builds ABB

ABB and Munich-based Siemens compete in areas such as factory automation gear and power-transmission equipment. ABB, which posts fourth-quarter earnings Feb. 16, had revenue of about $32 billion in 2010, with power products making up about 27 percent of sales.

Hogan has vowed to pursue “disciplined” acquisition opportunities across all business areas and geographies, and he has proven that he is willing to abandon a deal. In 2010, he walked away from a planned purchase of Chloride Group Ltd. after being outbid for the U.K. company by Emerson Electric Co. (EMR)

Hogan has made the Americas one of his main regions in which to pursue growth in power systems, discrete automation and low-voltage products. By 2015, ABB wants to generate as much as 30 percent of revenue from the region, compared with 19 percent in 2010. The company has said that it will continue to focus on power and automation and doesn’t intend to divest assets.

ABB has said purchases may boost annual sales growth by as much as 4 percent until 2015.

A purchase of Thomas & Betts would mark the second major deal announced by a Swiss company in less than a week. Roche Holding AG offered $5.7 billion on Jan. 25 in a hostile bid for Illumina Inc. to bolster sales of gene-mapping equipment.

To contact the reporter on this story: Zachary R. Mider in New York at zmider1@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net