Some Baldor plant workers could become millionaires

In an era where corporate buyouts often benefit only the few executives at the top, the ABB-Baldor deal may be atypical.

Zurich, Switzerland-based ABB announced Nov. 29 its intention to acquire Fort Smith-based Baldor in a $4.2 billion deal expected to close in the first quarter of 2011. ABB said it will keep the corporate headquarters operation in Fort Smith, and relocate its North American headquarters to Fort Smith.

More importantly, ABB offered a $63.50 per share price for Baldor shares (NYSE: BEZ), a more than 40% premium on the Nov. 29 closing price of $45.11. Also, the buyout offer is more than 157% above the 52-week low price of $24.67.

Of the about 6,000 Baldor employees in the U.S., about 5,000 are shareholders, according to Baldor Chairman and CEO John McFarland. Baldor employs about 2,000 in the Fort Smith area, and 7,500 globally.

The Baldor Electric Co. Employees Profit Sharing and Savings Plan owned 3,578,983 shares (as of March 17), representing 7.7% of shares outstanding, which makes it the largest ownership group. The value of the employee profit sharing plan jumped from $161.447 million on Nov. 29 to $226.585 million on Nov. 30 — a 40.34% gain.

REGIONAL IMPACT
John Taylor, senior vice president of John Taylor Financial-Sterne Agee and a member of the board of directors at Fort Smith-based Benefit Bank, said the ABB-Baldor deal is likely to infuse millions of dollars into the Fort Smith regional economy. He said there could be “hundreds” of Baldor employees in the area who will see “potentially hundreds of thousands of dollars” added to their wealth because of the deal.

“The important thing is, that many of the employees’ financial stability and their ability to some day retire, improved dramatically overnight,” Taylor said. “Think about the fact that overnight they made an additional 40%” on their Baldor investments.

Although he predicts the ABB-Baldor deal with benefit the regional economy, Taylor does not expect an “immediate discernible bump” in sales tax collections or other measures of local consumer spending.

According to Baldor officials, a completed deal with ABB represents a $150 million gain among Baldor employees who own shares. With a little more than 25% of total employees in the Fort Smith area, the deal holds the potential to deliver millions of dollars from the coffers of ABB to executives, workers and families in the Fort Smith area.

It’s likely many Baldor employees have already cashed in — deal or no deal with ABB. More than 28.198 million Baldor shares were traded Tuesday, a 5,032% increase over the 65-day average volume. The shares closed Tuesday at $63.31, up $18.20 on the day and just 19 cents short of the ABB offer price.

Taylor said the fact that Baldor shares closed so near the ABB offer price suggests “the market believes the chance of this happening is close to 100%.” He also said he understands why so many people sold their shares.

“Why would you not sell your stock today and run the risk of losing all that?” Taylor said. “Unless there is a tax reason not to do it, it’s not worth hanging out there another 3 or 4 months to get an extra 25 cents per share.”

MILLIONAIRE EMPLOYEES
In a late Tuesday interview with The City Wire, McFarland said all Baldor employees are a “beneficiary of this transaction” because Baldor is one of the few publicly held companies that offer stock options to all employees.

“There are people right across the parking lot there that are working tonight on the line making $16 or $17 an hour that are now millionaires as a result of this transaction,” McFarland said. “That’s the impact you ought to be writing about.”

Even so, Baldor executives won’t have to soon worry about the price of steak or a good Merlot.

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All 25 Baldor executives and directors owned 2,039,147 shares (as of March 17), or 4.3%, of outstanding shares. The value of that group grew from $91.985 million on Nov. 29 to $129.098 million on Nov. 30.

McFarland, who owned 479,911 shares as of March 17, saw his potential gain grow from $21.648 million on Nov. 29 to $30.383 million on Nov. 30. Not bad for an executive who began with Baldor in January 1970 as a lowly part-time hourly worker in one of Baldor’s Fort Smith plants.

Ron Tucker, the incoming Baldor CEO who owned 156,871 shares as of March 17, saw his stock value climb from $7.076 million on Nov. 29 to $9.931 million less than 24 hours later.

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Comments

Nest Eggs

Be best if the hourly workers not count their chickens before they hatch. Even if, capital gains, alternate minimum taxes, along with higher tax brackets will eat up the larger portion of the hopefully realized gains. Best to wait and see what the situation is down the road. The path may not be as so primrose as the portrayal. The folks at the top can go ahead with trips to the butcher shops and wine stores, but those at the bottom had best wait and see what the net results are.

One time profit wasn't worth the future of a USA owned company

I find it interesting that the one who made the most off this deal is saying the employees should brag about their new "profits". Unless you a lot of stock, then by the time you pay capital gains on those profits, the government has taken most of it. So let's say you did make $100,000 overnight (this is what the average night shift worker made in his stock options, get real McFarland, they didn't all own $7M worth of stock!), then you'll bring home about $70K. Now, the reality. Baldor is no longer being driven by Fort Smith folks. Anyone that knows anything about ABB knows that their management will be in control in the future. So, when you wake up in the morning, you'll always wonder if today is the day that ABB farms out your job to Mexico or China. Made in Fort Smith, USA is about to be history. McFarland sold you out to make his $$$. So, brag about your money and in a year it will all be spent and you'll be coming to work miserable. If you ever think a one time bonus will make you like your job more, you are wrong. John and Ron and others made their money, they can retire today and be fine. Can you?

truth

I agree with you 100%.. too bad everyone else is blinded by the glitz. This is in reality, a very sad day for the American worker as well as America, Yet ANOTHER strong American owned and operated company is sold out to foreign investors for the benefit of a few and the dismay of the many. How can we as employees not feel a bitof a loss when we see the company that WE built with our sweat and labor sold for such a low premium??? There used to be a sense of pride and patriotism in working for one of the few American industries that produced goods HERE and sold them overseas. With our profits staying here and working for the good of OUR communities. I hope the board can sleep well at night knowing that they sold out the very people who made "their" company so strong and valuable. I for one was happy with the rate of growth we were having.. if it meant job security and a stronger America. I, along with many who work beside me, will not become a millionaire in this transaction. I will become another statistic in this war on the middle class, this horrible display of corporate fatcat greed and total disregard for the working class. Sleep well gentlemen

Swiss cheese,punching holes in the American dream,Looting Rats

I took an early retirement from a major Electric/Elevator company bought out by a Swiss company over twenty years ago. The job became more compromising with customer service suffering in the name of profits. No more craftsmanship allowed, just put out the fires crisis management. That company dropped from its lofty reputation built by George Westinghouse. No stock options for the technicians as we had Union pensions and health benefits....Good thing, as I wouldn't have been able to retire otherwise. Having "gotten over" my disillusionment with globalization and foreign takeovers, I pulled up bootstraps and flipped houses during the last real estate boom out west only to lose most of my profits here in Fort Smith real estate when the banks stopped lending in 2007. We can take a leap of faith in our economic system but at our own peril......it is all a crapshoot where insiders win with loaded dice.......and people worry about casinos?, Gimme a break,what BS!! Having been assaulted financially, what could be next? How about eliminating Social Security, the right-wingnuts are targeting that now as they think they have a mandate from this most recent election.....I can envision it now; silver-haired Seniors with wheelchairs and walkers toting semi-automatics in Protest, shouting out..."What? You wanna'live forever?....Charge!!... shoot before you see the whites of their eyes as we all got cataracts"... To be continued
I took an early retirement from a major Electric/Elevator company bought out by a Swiss company over twenty years ago. The job became more compromising with customer service suffering in the name of profits. No more craftsmanship allowed, just put out the fires crisis management. That company dropped from its lofty reputation built by George Westinghouse. No stock options for the technicians as we had Union pensions and health benefits....Good thing, as I wouldn't have been able to retire otherwise. Having "gotten over" my disillusionment with globalization and foreign takeovers, I pulled up bootstraps and flipped houses during the last real estate boom out ...>> Read the entire comment.

I know whatcha mean

One day, a few years ago, my net worth was less than $100,000 with a lot of debt. Then, the next day, it improved to over four and a half million. Life is sometimes good to those who have paid the price. Only the good die young and yes, I've been there and have shot'em in the eye and will probable live forever, much to the chagrin of many. Not all get what they deserve, if that were so there would be a whole lot less of us. Live with what you've got, it could be worse and probably will be. Have a good day!

hawkeye and wealth

don't believe a word of your blog and don't know whatcha mean. but do know this, that people that have wealth, don't brag about it during hard financial times for most! its just a little tacky! have a great day!

honest abe and cheese

great comment-really enjoyed that one!!!!!!!

Congratulations Baldor employee stockholders

The Baldor outcome is the way capitalism is supposed to work for profit sharing. Too bad this is "atypical". If we could all trust business to operate in a manner to leave a little left over for the common man to acquired some common stock to profit from we might need less oversight. Until then we can read textbook theory to sleep better!! Adman,I did not want to be the spoiler but you are correct also.

honest abe question

were you talking about baldor or some of our city leaders motives?????

Wrong stock pick

I guess the homeless in our community picked the wrong stock......Ah, Greed is Good!!

Wrong Job Pick

No Honest, the unemployed were just unfortunate to have picked the wrong job! The employees that owned stock in their retirement will enjoy the windfall. Of course the management will enjoy more from the sale, but so goes life. Baldor did it the American way, worked hard, had good products and a bigger competitor bought them out. That isn't about greed! Greed is when you have special friends bailing out special friends of failing companies.