AIMC - Altra Industrial Motion surges on Regal Rexnord's $5 billion bid

Altra Industrial Motion ( NASDAQ: AIMC ) on Thursday jumped 48% after Regal Rexnord ( NYSE: RRX ) agreed to buy the maker of products used in industrial automation for $4.95 billion. Conversely, Regal Rexnord slumped 13% after announcing the deal and offering a peek at Q3 results.

Regal Rexnord offered $62 a share in the all-cash transaction, which is expected to close in the first half of next year after receiving shareholder and regulatory approvals. The offer is 54% greater than Altra's closing price of $40.25 a share on Oct. 26.

"The automation business has highly attractive growth prospects and margins, serving many markets that have anticipated secular growth tailwinds, including factory automation, medical, aerospace and warehouse and logistics," Louis Pinkham, CEO of Regal Rexnord, said in a statement announcing the deal.

With the addition of Altra, Regal Rexnord expects 2022 pro forma revenue of about $7.2 billion, adjusted EBITDA of roughly $1.5 billion and an adjusted EBITDA margin of approximately 21%.

Preannounced Q3 Results

Regal Rexnord also revealed some key financial information from its Q3 earnings announcement, which will be on Oct. 31 before stock markets open for regular trading.

The company expects to report adjusted diluted earnings per share of $2.66, which beats the current Wall Street estimate by $0.03.

Net sales for Q3 are expected to be $1.33 billion, up 49% from a year earlier.

For the full year, Regal Rexnord now expects adjusted diluted earnings per share to be in a range of $10.35 to $10.75.

The guidance doesn't include any costs, expenses or other effects of the takeover of Altra, according to Regal Rexnord.

"Importantly, Regal Rexnord and Altra are a terrific cultural fit, with a shared commitment to integrity, customer success, and continuous improvement," Pinkham said. "We are confident that these shared values and complementary businesses will help facilitate a seamless transition and support our continued success."

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