ABB to buy Thomas & Betts for $3.9 billion in U.S. push

Mon Jan 30, 2012 11:10am EST
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By Caroline Copley and Victoria Howley

(Reuters) - Swiss engineering group ABB ABBN.VX has agreed to buy U.S. electrical components maker Thomas & Betts TNB.N for $3.9 billion to ramp up its presence in the world's largest market for low-voltage products.

Under the terms of Monday's deal, ABB will pay $72 per share in cash -- a 24 percent premium over the stock's closing price on Friday -- for the company, which supplies the construction, communications and power industries with connectors for cables, steel masts and heating and ventilation products.

ABB's Chief Executive Joe Hogan said the acquisition would open up a potential U.S. market for low-voltage products of about $24 billion for ABB's most profitable product range.

The deal would bring ABB's expenditure on companies in the United States to about $9 billion since Hogan took the helm in 2008, as he seeks to plug gaps in the group's portfolio.

The deal may spur more acquisitions as global multi-industry companies, such as Eaton Corp (ETN.N: Quote), look to expand in an increasingly attractive electrical equipment sector, said analyst Mike Wood of Macquarie Securities, who added that ABB looked at other targets before its Thomas & Betts deal.

"There's an increased need for electronics and retrofits to improve energy efficiency across the sector, and these companies are seeing growth rates better than the end markets in which they're competing, so this sector in general is an attractive breeding ground for a takeout," Wood said.

Thomas & Betts, which reported strong sales and profit growth on Monday, sells many of its products to U.S. utilities, and ABB is hoping to grab business as these companies boost spending over the next few years to bring older plants in line with new environmental regulations.

"Eighty percent of the revenue of our low-voltage business is contained between China and Europe, and the U.S. has the world's largest, so our primary intent here is to make sure we penetrate that market," ABB's CEO Hogan told a conference call.   Continued...