BELOIT, Wis., Oct. 4, 2021 /PRNewswire/ -- Regal Rexnord
Corporation (NYSE: RRX)
- Merger Creates More Balanced Portfolio With Mechanical Power
Transmission Nearly 50% Of Sales
- Substantial Growth Opportunities From Selling Industrial
Powertrain Solutions Engineered To Raise Energy Efficiency And
Customer Productivity
- Committed To Energy Efficiency Always Being Top Of Mind – The
New Regal Rexnord Will Now Derive Significantly More Of Its Sales
From ESG-Enabling Products And Solutions
- Reiterating Anticipated 2022 Revenue Of Approximately
$5.0 Billion
- Reiterating Anticipated Cost Synergies Of At Least $120 Million Over 3 Years
- Reiterating Expected 2022 Adjusted EBITDA Over $1 Billion
- Pro Forma Leverage Of Less Than 1.0x Estimated 2021 Net
Debt/EBITDA
- Special Cash Dividend Of $6.99
Per Share Paid To RBC Shareholders On October 5th, In The Aggregate Worth Approximately
$284 Million
- Regal Beloit Corporation Renamed Regal Rexnord Corporation
- Former RBC Shares Will Trade As RRX Beginning October 5th
- A Video Highlighting The New Regal Rexnord Is Available
Here
Today, Regal Rexnord Corporation announced that it has completed
the merger of Regal Beloit Corporation with Rexnord Corporation's
Process & Motion Control Business ("PMC") closing the deal that
was signed on February 15, 2021.
CEO Louis Pinkham commented,
"The addition of PMC is a tremendous positive step forward in
Regal's ongoing transformation, positioning our company – the new
Regal Rexnord – better than ever before, to create significant
value for all our key stakeholders. We will provide the industry's
most complete Industrial Powertrain solutions – comprised of our
high-efficiency motors and critical power transmission components –
to enable a range of efficiency and productivity gains for our
customers. Our shareholders will benefit from a business that we
expect will be faster-growing, higher-margin and more cash
generative. And Regal Rexnord associates will benefit from being
part of an enterprise that is eager to continue building momentum
by investing for growth, particularly by investing in our
associates."
"Merging with PMC also positions Regal Rexnord to
better fulfill our business purpose – creating a better tomorrow by
energy-efficiently converting power into motion. We will do this by
providing more energy-efficient systems and solutions, developed
with greater intention, that work better together across the power
train, especially by leveraging voice of the customer to inform our
innovation efforts. And we will also improve our cost position by,
among other things, working to reduce our manufacturing footprint,
leveraging the scale of our purchasing and consuming fewer
resources in our production processes. Said another way, we will
succeed by driving innovation with purpose – purposeful for our
customers and purposeful for our planet."
The merger is expected to:
- Benefit Regal Rexnord customers: More robust
solutions across the industrial powertrain, a broader component
offering, enhanced digital and IoT capabilities, investments in
domain expertise across a broader set of end market verticals, and
a more flexible global manufacturing footprint that boosts product
availability and service levels are some of the ways the new Regal
Rexnord will be positioned to be a stronger and more collaborative
partner to its customers.
While merger benefits initially may be more pronounced in the power
transmission business, all customers are expected to benefit over
time. Enhanced financial and technological capabilities can make
Regal Rexnord an even more capable partner. Legacy Regal's
expertise in motors, air moving and refrigeration technologies,
plus an enhanced capability in power transmission, can lead to more
value-added solutions relevant to customers across the business.
- Accelerate organic growth: Selling more robust,
integrated solutions across the industrial powertrain should
provide significant outgrowth opportunities. Engineering
electromechanical components to work better together in optimized
solutions can lead to improved operating performance, including
greater energy efficiency. It's also particularly value-added to
customers at a time when many are looking to outsource more of
their engineering activities, often in light of challenges when it
comes to recruiting and retaining in-house engineers.
Beyond the industrial powertrain, significant opportunities exist
for cross-selling, developing domain expertise in a wider range of
end markets, expanding the IoT and digital solution set and
leveraging 80/20 to direct the combined organization's resources to
the highest value opportunities.
In the near-term, as supply chains are constrained and component
availability can be an obstacle to growth, being able to leverage
the operational strength and inventory of the combined organization
should give Regal Rexnord a product availability and service level
advantage with customers.
- Drive sizable further margin gains: In addition to
the significant, ongoing restructuring that has been underway at
legacy Regal, which has resulted in material margin expansion over
the last two years, including hitting the Company's "300-in-3"
margin expansion program goal over a year ahead of schedule, the
new Regal Rexnord expects to realize $120
million of cost synergies over the next three years related
to the merger with PMC. The merger synergies are expected to drive
over 500 basis points of adjusted EBITDA margin expansion by
2024.
- Strengthen Free Cash Flow: The combination of the
expected improved organic growth, significant cost synergies, plus
opportunities around working capital and leveraging the combined
legacy Regal and PMC manufacturing footprints to improve capital
expenditure efficiency should drive improved free cash flow. More
detail related to cash flow expectations will be provided in due
course, but it is expected that the new Regal Rexnord will be able
to consistently deliver cash flow conversion rates above 100%.
- Raise ROIC: Stronger growth, margins and more
efficient use of working capital and capital expenditures are
expected to drive return on capital higher – to greater than 10% by
Year 5. Further upside to Regal Rexnord's ROIC is anticipated from
growth, cost-out and lean initiatives that were already underway at
legacy Regal and Rexnord PMC.
- Result in a stronger One Regal
Rexnord team: The company's new name, Regal
Rexnord Corporation, signifies bringing together the complementary
strengths of two industry leading businesses and highlights their
now common future as a leader in the engineering and manufacturing
of power transmission solutions and high-efficiency electric motors
and systems.
- Create opportunities for associates: Regal Rexnord
associates will benefit from being part of a more profitable and
faster growing enterprise that is eager to continue building
momentum by investing in the business, in particular by investing
in its associates.
- Help the planet at large: Regal Rexnord helps make
modern life possible, by providing critical components and
integrated solutions that support a range of necessary applications
across the HVAC, agriculture, foodservice, mining, manufacturing
and ecommerce end markets – to name just a few. A primary goal, and
also a Regal Rexnord Value, is driving innovation with
purpose. That means listening to, and collaborating with
customers to create products and solutions they value. It also
means subscribing to a larger purpose – playing a part in helping
the environment, by insuring that raising the bar on energy
efficiency remains a fundamental component of all research, new
product development and engineering efforts. In turn, purposeful
innovation contributes to achieving Regal Rexnord's business
purpose – creating a better tomorrow by energy-efficiently
converting power into motion.
Transaction Summary
Under the terms of the transaction, Rexnord Corporation completed a
spin-off of PMC by way of a pro rata dividend of all of the
outstanding common stock of Rexnord's then-wholly owned subsidiary,
Land Newco, Inc. ("Land"), the owner of PMC, to Rexnord
stockholders as of the record date for the dividend. Immediately
following the spin-off, Regal Beloit Corporation combined with Land
in a stock-for-stock merger pursuant to which Land became a
wholly-owned subsidiary of Regal. Following the closing of the
transaction, Regal changed its legal name from Regal Beloit
Corporation to Regal Rexnord Corporation, and Rexnord changed its
legal name to Zurn Water Solutions Corporation (NYSE:ZWS).
Final Exchange Ratio
Pursuant to the transaction, at the closing, each share of Land
common stock was cancelled and automatically converted into the
right to receive shares of Regal common stock. The number of shares
of Regal common stock that each Land stockholder is entitled to
receive was determined by an exchange ratio calculated pursuant to
the terms of the Merger Agreement between the parties. The final
exchange ratio for the transaction is 0.22296103 shares of Regal
common stock for each share of Land common stock (subject to the
receipt of cash in lieu of fractional shares).
Regal Special Dividend
In addition, holders of record of shares of Regal Beloit
Corporation common stock as of October 1,
2021 are entitled to receive $6.99 per share pursuant to the previously
announced special dividend in connection with the transaction (the
"Regal Special Cash Dividend"). The Regal Special Cash Dividend
will be paid on October 5, 2021. The
amount of the Regal Special Cash Dividend is approximately
$284 million in the aggregate.
Ticker Change
On October 5, 2021, Regal common
stock, which trades on the New York Stock Exchange, will cease
trading under the ticker symbol "RBC" and commence trading under
the ticker symbol "RRX". There is no change in the CUSIP of Regal
common stock in connection with the closing of the transaction.
Advisors
Barclays and Incentrum Group are serving as financial advisors to
Regal, and Sidley Austin LLP is serving as legal counsel.
About Regal Rexnord
Regal Rexnord Corporation is a global leader in the engineering and
manufacturing of industrial powertrain solutions, power
transmission components, electronic motors and controls, air moving
products, and specialty electronics, serving customers throughout
the world. Through longstanding technology leadership and an
intentional focus on producing the most energy-efficient products
and systems, Regal Rexnord helps create a better tomorrow – for its
customers and for the planet.
Regal Rexnord is comprised of four operating segments: Motion
Control Solutions, Climate Solutions, Commercial Systems and
Industrial Systems. Regal Rexnord is headquartered in Beloit, Wisconsin and has manufacturing,
sales, and service facilities worldwide. For more information,
visit RegalRexnord.com.
Forward Looking Statements
This press release contains forward-looking statements, within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, which reflect Regal Rexnord's current estimates,
expectations and projections about Regal Rexnord's future results,
performance, prospects and opportunities. Such forward-looking
statements may include, among other things, statements about the
merger with the PMC Business, the benefits and synergies of the
transactions described in this communication (the "Transactions"),
future opportunities for Regal Rexnord, and any other statements
regarding Regal Rexnord's future operations, anticipated business
levels, future earnings, planned activities, anticipated growth,
market opportunities, strategies, competition and other
expectations and estimates for future periods. Forward-looking
statements include statements that are not historical facts and can
be identified by forward-looking words such as "anticipate,"
"anticipate," "believe," "estimate," "expect," "plan," "may,"
"will," "project," "forecast," "would," "could," "should," and
similar expressions. These forward-looking statements are based
upon information currently available to Regal Rexnord and are
subject to a number of risks, uncertainties, and other factors that
could cause actual results, performance, prospects or opportunities
to differ materially from those expressed in, or implied by, these
forward-looking statements. Important factors that could cause
actual results to differ materially from the results referred to in
the forward-looking statements Regal Rexnord makes in this
communication include: risks relating to any unforeseen changes to
or the effects on liabilities, future capital expenditures,
revenue, expenses, synergies, indebtedness, financial condition,
losses and future prospects; the possibility that Regal Rexnord may
be unable to achieve expected synergies and operating efficiencies
in connection with the Transactions within the expected time-frames
or at all and to successfully integrate the PMC Business; expected
or targeted future financial and operating performance and results;
operating costs, customer loss and business disruption (including,
without limitation, difficulties in maintaining relationships with
employees, customers, clients or suppliers) being greater than
expected following the Transactions; Regal Rexnord's ability to
retain key executives and employees; the continued financial and
operational impacts of and uncertainties relating to the COVID-19
pandemic on customers and suppliers and the geographies in which
they operate; uncertainties regarding the ability to execute
restructuring plans within expected costs and timing; the ability
to obtain the anticipated tax treatment of the Transactions and
related transactions; actions taken by competitors and their
ability to effectively compete in the increasingly competitive
global electric motor, drives and controls, power generation and
power transmission industries; the ability to develop new products
based on technological innovation, such as the Internet of Things,
and marketplace acceptance of new and existing products, including
products related to technology not yet adopted or utilized in
geographic locations in which Regal Rexnord does business;
fluctuations in commodity prices and raw material costs; dependence
on significant customers; seasonal impact on sales of products into
HVAC systems and other residential applications; risks associated
with global manufacturing, including risks associated with public
health crises; issues and costs arising from the integration of
acquired companies and businesses and the timing and impact of
purchase accounting adjustments; Regal Rexnord's overall debt
levels and its ability to repay principal and interest on its
outstanding debt, including debt assumed or incurred in connection
with the Transactions; prolonged declines in one or more markets,
such as heating, ventilation, air conditioning, refrigeration,
power generation, oil and gas, unit material handling or water
heating; economic changes in global markets, such as reduced demand
for products, currency exchange rates, inflation rates, interest
rates, recession, government policies, including policy changes
affecting taxation, trade, tariffs, immigration, customs, border
actions and the like, and other external factors that Regal Rexnord
cannot control; product liability and other litigation, or claims
by end users, government agencies or others that products or
customers' applications failed to perform as anticipated,
particularly in high volume applications or where such failures are
alleged to be the cause of property or casualty claims;
unanticipated liabilities of acquired businesses; unanticipated
adverse effects or liabilities from business exits or divestitures;
unanticipated costs or expenses that may be incurred related to
product warranty issues; dependence on key suppliers and the
potential effects of supply disruptions; infringement of
intellectual property by third parties, challenges to intellectual
property, and claims of infringement on third party technologies;
effects on earnings of any significant impairment of goodwill or
intangible assets; losses from failures, breaches, attacks or
disclosures involving information technology infrastructure and
data; cyclical downturns affecting the global market for capital
goods; changes in the method of determining London Interbank
Offered Rate ("LIBOR"), or the replacement of LIBOR with an
alternative reference rate; and other risks and uncertainties
including, but not limited, to those described in the section
entitled "Risk Factors" in Regal Rexnord's joint proxy
statement/prospectus-information statement on file with the
Securities and Exchange Commission, in Regal Rexnord's Annual
Report on Form 10-K on file with the SEC and from time to time in
other filed reports including Regal Rexnord's Quarterly Reports on
Form 10-Q. For a more detailed description of the risk factors
associated with Regal Rexnord, please refer to Regal Rexnord's
Annual Report on Form 10-K for the fiscal year ended January 2, 2021 on file with the SEC and
subsequent SEC filings. Shareholders, potential investors, and
other readers are urged to consider these factors in evaluating the
forward-looking statements and are cautioned not to place undue
reliance on such forward-looking statements. The forward-looking
statements included in this communication are made only as of the
date of this communication, and Regal Rexnord and Land undertake no
obligation to update any forward-looking information contained in
this communication or with respect to the announcements described
herein to reflect subsequent events or circumstances.
Non-GAAP Measures (Unaudited)
(Dollars in Millions, Except per Share Data)
We prepare financial statements in accordance with accounting
principles generally accepted in the
United States of America ("GAAP"). We also periodically
disclose certain financial measures in our quarterly earnings
releases, on investor conference calls, and in investor
presentations and similar events that may be considered "non-GAAP"
financial measures. This additional information is not meant to be
considered in isolation or as a substitute for our results of
operations prepared and presented in accordance with GAAP.
In this press release, we disclose the following non-GAAP
financial measures: adjusted EBITDA, and adjusted EBITDA margin. As
used in this communication, we define: (i) "adjusted EBITDA" to
mean: earnings before interest, taxes, depreciation, acquisition
related amortization, acquisition related costs, restructuring and
related costs, stock-based compensation, asset impairment and other
income or charges that management does not consider to be directly
related to operating performance, and (ii) "adjusted EBITDA margin"
to mean: Adjusted EBITDA as a percentage of net sales. We believe
that these non-GAAP financial measures are useful measures for
providing investors with additional information regarding our
results of operations and for helping investors understand and
compare our operating results across accounting periods and
compared to our peers. Our management primarily uses adjusted
EBITDA and adjusted EBITDA margin to help us evaluate our business
and forecast our future results. Accordingly, we believe disclosing
each of these measures helps investors evaluate our business in the
same manner as management. For forward-looking non-GAAP measures
(as used in this press release, adjusted EBITDA and adjusted EBITDA
margin), we are unable to provide a reconciliation to the most
comparable GAAP financial measure because the information needed to
reconcile these measures is dependent upon future events, many of
which are outside of management's control as described above.
Additionally, estimating such GAAP measures and providing a
meaningful reconciliation consistent with our accounting policies
for future periods is extremely difficult and requires a level of
precision that is unavailable for these future periods and cannot
be accomplished without unreasonable effort. Forward-looking
non-GAAP measures are estimated consistent with the relevant
definitions and assumptions.
In addition to these non-GAAP measures, we use the term "organic
sales growth" to refer to the increase in our sales between periods
that is attributable to organic sales. "Organic sales" to refers to
GAAP sales from existing operations excluding any sales from
acquired businesses recorded prior to the first anniversary of the
acquisition and excluding any sales from business divested/to be
exited recorded prior to the first anniversary of the exit and
excluding the impact of foreign currency translation. The impact of
foreign currency translation is determined by translating the
respective period's organic sales using the currency exchange rates
that were in effect during the prior year periods.
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