Regal Beloit Corporation (NYSE: RBC) disclosed that it has finalized an agreement with Rexnord. Following the terms of the deal, after the tax-free spinoff of the PMC segment of Rexnord, it will immediately join with Regal in a Reverse Morris Trust (RMT) transaction.
A reverse Morris trust is a form of corporation that enables a unit to merge with a company that was spun off with a strategic merger or conjunction with another firm free of taxes, as long as all the legal necessary conditions for spinoff are satisfied. After the pact, Regal shareholders will hold the 61.4% stake in New Regal and Rexnord shareholders will hold 38.6% ahead of a possible dividend to Regal shareholders and a related ownership amendment to Rexnord shareholders.
After the deal, the shareholders of Rexnord will still hold ownership of the Water Management platform of the firm. It has been disclosed that after the combination of Regal with PMC, the 2020 pro forma revenue of Regal stood at nearly $4.1 billion. Its Adjusted EBITDA was $740 million. The pro forma 2020 EBITDA margin was nearly 18%.
After finalizing the deal, the high-class portfolio of PMC will be integrated with Regal. It will speed up innovation in industrial power broadcasting and motion control solutions through superior planning, technology, and manufacturing capacity. PMC has gained recognition as the prominent provider of transmission components and solutions.
This deal will also increase the portfolio of Regal and expand the product diversity. This transaction will also provide value to the shareholders of Regal and also optimized the growth of the firm. Regal and PMC both are two corresponding businesses.
The financial benefits of this transaction include the conjunction with the PMC fills loopholes in Regal's PTS portfolio. It also enhances the end market diversity and speeds up the R&D and digital service abilities of the firm. After the execution of an agreement, the two new directors will join the board of Regal after the unanimous decision of both the firms.