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Regal Rexnord Corporation RRX yesterday announced that it has acquired Arrowhead Systems in an all-cash transaction. The company announced the deal on Nov 2, concurrently with its third-quarter 2021 results.
This is the first acquisition made by Regal Rexnord since it started trading on the NYSE on Oct 5, 2021. Regal Rexnord is the new legal name of Regal Beloit Corporation. The entity was formed after the combination of Regal Beloit’s business operations with Rexnord Corporation’s Process & Motion Control segment on Oct 4.
Rexnord Corporation’s new legal name is Zurn Water Solutions Corporation ZWS. (For information about the business combination and other related events, please read: Regal Beloit Trades as Regal Rexnord Post Rexnord Deal)
Notably, Zurn Water made its first buyout of McWane, Inc.’s Wade Drains product portfolio on Nov 18, 2021. ZWS also started trading on the NYSE on Oct 5.
Shares of Regal Rexnord gained 0.26% yesterday, ending the trading session at $170.39.
Inside the Headlines
Arrowhead specializes in providing automation solutions for industrial process. Its products include palletizers and conveyors for use in consumer staples, food & beverage, aluminum cans, personal care, and other markets. It also focuses on providing aftermarket solutions and services and digitization projects.
It boasts a solid customer base in the United States and outside and an efficient management team. For 2021, Arrowhead is anticipated to generate revenues of $100 million.
With the addition of Arrowhead, Regal Rexnord is well-positioned to leverage the benefits of its extended product offerings, end-market exposure, customer base, technological expertise and experienced team. The buyout will enhance Regal Rexnord’s existing conveying offerings, including metal conveyor belts, transfer/divert stations, tabletop conveyor chains, plastic conveyor belts and guide rails.
By the fifth year of the buyout, Arrowhead is expected to strengthen ROIC to >10% and generate revenue and cost synergies of $12 million. Also, organic sales growth of high-single to low-double-digit is expected from the buyout by the third year.
Regal Rexnord will integrate Arrowhead with its Motion Control Solutions segment. This segment comprises the former Regal Beloit’s Power Transmission Solutions and the former Rexnord Corporation’s Process & Motion Control segment. In the third quarter of 2021, the segment’s revenues totaled $207.6 million, reflecting an increase of 24.4% from the year-ago quarter. The segment’s revenues represented 23.3% of Regal Rexnord’s sales in the quarter.