Drives and Control Solutions

Motors, Control Solutions, Power Transmission and Advanced Motion Technology                                                                 

February 16, 2021

Regal Beloit Corporation and Rexnord Corporation have recently announced that they have reached a definitive agreement whereby Rexnord will separate its Process & Motion Control (“PMC”) segment by way of a tax-free spin-off to Rexnord shareholders and then immediately combine it with Regal in a Reverse Morris Trust (“RMT”) transaction. Regal shareholders will own 61.4% and Rexnord shareholders will own 38.6% of the combined entity (“New Regal”), before a potential dividend to Regal shareholders and a corresponding ownership adjustment to Rexnord shareholders, sized at closing to ensure that RMT ownership requirements are met. Rexnord shareholders will continue to own 100% of the businesses’ Water Management platform.

With the addition of PMC, Regal’s 2020 pro forma revenue was approximately $4.1 billion with Adjusted EBITDA of $740 million, excluding $120 million in annualized cost synergies expected to be achieved by year three after closing. The pro forma 2020 EBITDA margin was approximately 18%.

The transaction combines Regal and PMC’s best-in-class power transmission portfolios to drive innovation in industrial power transmission and motion control solutions through superior engineering, technology, and manufacturing capabilities. PMC is a world-class provider of specialized, highly-engineered power transmission components and solutions, with a strong portfolio of Industrial Internet of Things (“IIOT”) solutions. The transaction expands Regal’s portfolio, customer reach, and product diversity while creating shareholder value through enhanced growth and substantial cost synergies.

“This transformative combination brings together two highly complementary businesses, creating a premier provider of power transmission products, poised to deliver enhanced value for our customers, associates, and shareholders,” said Regal CEO, Louis Pinkham. “Combining with PMC accelerates our transformation momentum and is an important step towards our vision to accelerate profitable growth. We believe this transaction will create meaningful value for customers by providing comprehensive solutions across the entire industrial drive train, increased portfolio and reach, and an enhanced presence in diverse and attractive end markets and geographies. Shareholders will benefit from compelling value creation and financial benefits, including enhanced growth, cost synergy-driven margin expansion, attractive ROIC, and earnings accretion.”

“We have long admired PMC’s products and capabilities, highly-regarded brands, and talented team. Importantly, Regal and PMC are a terrific cultural fit with a shared commitment to integrity, customer success, continuous improvement, and a passion to win. We are confident these shared values and complementary business structures will help facilitate a seamless transition and fuel our continued success.”

Todd Adams, Chairman, President and CEO of Rexnord, commented, “This transaction provides clear and compelling value for Rexnord shareholders through ownership in a combined company with enhanced scale and significant growth opportunities. Regal is committed to investing in the continued growth of its power transmission business, and we are confident the PMC platform and team are a perfect fit to accelerate their strategy. Rexnord’s Water Management business will be well-positioned to continue to drive differentiated growth as a standalone business aligned around its distinct competitive advantages and market dynamics.”

Key Strategic & Financial Benefits

• Creates a premier player in industrial power transmission with complete product portfolio across the entire drive train. The combination with PMC fills gaps in Regal’s PTS portfolio, creates a more compelling partner for distributors, and enables Regal to provide complete drive train solutions across all major applications for customers. In addition, the transaction represents an attractive value proposition for both customers and end users with enhanced service capability breadth, technology content and domain expertise.

• Improves end market diversity. Creates new avenues for growth through expanded focus outside of North America. Improves end market diversity, with increased exposure to attractive high-growth end markets including Renewable Energy, Food and Beverage, Automation, Aerospace, and eCommerce. Regal’s combined portfolio is expected to be more balanced, with pro forma 2020 PTS comprising nearly 50% of sales, reducing cyclicality and unlocking greater portfolio flexibility.

• Accelerates R&D and digital service capabilities. Combined R&D fuels the growth of next-generation products and faster development of value-added features through enhanced innovation and reinvestment. Provides opportunity to create world-class IIOT and digital experience with the Perceptiv™ and DiRXN® platforms, providing innovative new solutions for customers and end users.

• Substantial cost synergies of $120 million by year three, with $70 million realized in year one. Expected synergies to be driven by procurement, distribution efficiencies, footprint rationalization, and SG&A savings. Regal plans to continue robust investment in technology and innovation.

• Provides significant immediate and long-term value creation and financial benefits. The transaction provides attractive ROIC and is expected to be accretive to cash EPS in year one after closing. In addition, assuming the mid-point of the expected adjustment mechanism range (described below), Regal shareholders would be expected to receive a dividend of ~$7 per share. The transaction is expected to leave Regal with a strong balance sheet.

• Unites aligned cultures with deep commitment to 80/20 and LEAN principles. Shared cultures focused on serving customers and driving efficiency. Talent infusion expected to accelerate 80/20, LEAN, IIOT, and new product development initiatives.

Governance and Locations

Upon closing, Regal will be led by its existing Board of Directors with the addition of two new directors from the Rexnord board of directors, mutually agreed upon by Regal and Rexnord. Rakesh Sachdev will continue as non Executive Chairman of the Board. Regal’s CEO, Louis Pinkham, will lead the combined corporate entity, which will continue to be headquartered in Beloit, Wisconsin.

The combined PTS and PMC business will adopt the Rexnord name and be headquartered in Milwaukee, Wisconsin. Regal expects it will continue to maintain, invest in, and grow its presence in Florence, Kentucky, which will remain a strategic site.

Rexnord Chairman, President and CEO, Todd Adams, will continue to lead the Water Management business, which plans to remain headquartered in Milwaukee, Wisconsin.

Transaction Structure and Closing Conditions

Under the terms of the agreement, which has been unanimously approved by the Boards of Directors of both companies, Regal shareholders will own 61.4% and Rexnord shareholders 38.6% in New Regal, before a potential dividend to Regal shareholders and a corresponding ownership adjustment for Rexnord shareholders.

The transaction is structured as an RMT and is expected to be tax-efficient to Regal and Rexnord shareholders for U.S. federal income tax purposes. Significant shareholder overlap between Regal and Rexnord shareholders, and the adjustment mechanism, will ensure that the RMT threshold of greater-than-50% ownership by Rexnord shareholders in New Regal, after factoring overlapping shareholders, is met in all circumstances.

Based on current information on the size and characteristics of overlapping ownership, there is an expected dividend to Regal shareholders, with a corresponding ownership adjustment for Rexnord shareholders. Based on current information, we expect the dividend to be in the range of $100 to $500 million with a mid-point of $300 million. That midpoint corresponds to ownership in New Regal of 60.0% for Regal shareholders and 40.0% for Rexnord shareholders post dividend.

The transaction values PMC at $3.69 billion1 , representing 14.2x 2020 Adjusted EBITDA, or 9.7x after factoring run rate cost synergies. The transaction is subject to regulatory approvals, Regal and Rexnord shareholder approvals, and customary closing conditions, and is expected to close in the fourth quarter of 2021.

Conference Call and Investor Information

Regal and Rexnord will jointly hold a conference call to discuss the transaction at 7:30 AM CT (8:30 AM ET) on Tuesday, February 16, 2021. To listen to the live audio and view the presentation during the call, visit Regal’s Investor website: To listen by phone or to ask the presenters a question, dial 1- 888-317-6003 (U.S. callers) or + 1-412-317-6061 (international callers) and enter 9152907# when prompted.

A webcast replay will be available at the link above, and a telephone replay will be available at 1-877-344-7529 (U.S. callers) or + 1-412-317-0088 (international callers), using a replay access code of 10152538#. Both will be accessible for three months after the earnings call.

A copy of the investor presentation will be made available on Regal and Rexnord investor relations websites in advance of the conference call.

Fourth Quarter and Full Year 2020 Earnings Announcements

Regal and Rexnord separately announced their Fourth Quarter and Full Year 2020 earnings today and will be hosting separate earnings conference calls, at 9:00 AM CT (10:00 AM ET) and 10:00 AM CT (11:00 AM ET), respectively. Details of these calls can be found in the companies’ separate earnings press releases and on their respective investor relations websites.


Barclays and Incentrum Group are serving as financial advisors to Regal, and Sidley Austin LLP is serving as legal counsel. Barclays is also providing Regal with committed financing for the transaction. Citi and Evercore are serving as financial advisors to Rexnord, and Morgan, Lewis & Bockius LLP is serving as legal counsel. Credit Suisse is providing Rexnord with committed financing for the transaction.


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