Swiss engineering group ABB Ltd today said that it will buy US electrical components maker Thomas & Betts for $3.9 billion in cash to expand into the North American market for low-voltage products.

The Zurich-based engineering and electrical giant will pay $72 per share in cash, a 24 per cent premium over Thomas & Betts closing price of $57.95 on 27 January.

This is ABB's second major deal under CEO Joe Hogan, after the 2010 acquisition of Arkansas-based electrical motor maker Baldor Electric Company, for $4.2 billion (See: B to acquire electrical motor maker Baldor Electric for $4.2 billion).

 Memphis, Tennessee-based Thomas & Betts is a maker of electrical components and other products for industrial customers in North America, Europe and elsewhere.

Its main business is the manufacture of low-voltage and ultralow-voltage electrical products such as connectors, conduits and fittings as well as wiring management products for the construction, industrial and utilities markets.

These products are complementary to ABB's portfolio in its low voltage products division, which includes products such as breakers and switches.

Thomas & Betts also supplies towers for electrical power transmission and has a business that produces heating, ventilation and air conditioning units, both new to ABB but related to its core power and automation focus.

Thomas & Betts, which competes with Cooper Industries and Hubbell Inc, sells many of its products to US utilities, which are expected phase out current technology and build new transmission and distribution lines in line with new environmental laws.

It reported 2010 sales of about $2 billion, and, is expected to today report sales for 2011 of $2.3 billion and operating profits of $390 million. The company has a market capitalisation of about $3 billion.

The acquisition will give ABB will access to Thomas & Betts network of more than 6,000 distributor locations and wholesalers in North America, allowing it to double the size of its market to $24 billion.

Hogan said the purchase will also help ABB build critical mass and distribute its products in the US, which is the world's largest market for low-voltage gear, and which is ABB's most profitable line of equipment.

ABB said that it aims to attain about $200 million in annual synergies from the transaction by 2016, mainly from sourcing and purchasing. Hogan has cut more than $3 billion in costs in recent years by streamlining sourcing and moving more production to emerging markets.

''This is a unique opportunity for ABB to grow in the largely untapped North American low-voltage products market,'' said Tarak Mehta, executive committee member responsible for ABB's Low Voltage Products division, into which Thomas & Betts will be integrated as a stand-alone unit.

In November 2011, Joe Hogan had said the company has allocated up to $30 billion for acquisitions in the next five years, in order to better compete with Asian manufacturers.

In March last year, it acquired the operating business of its wholly owned Indian subsidiary, ABS Global Industries and Services Limited, for Rs400 crore (See: ABB to buy out Indian subsidiary for Rs400 crore).

ABB, created through the 1988 merger between Asea AB of Sweden and BBC Brown Boveri of Switzerland, now has a market value of 45 billion Swiss francs ($49 billion) and 2010 revenues of around $32 billion, has been on an acquisition spree since the past two years.

In 2010, it snapped up UK-based Chloride, a provider of uninterruptible power supply equipment, for £860 million and acquired Ventyx, a software provider for grid operators from Vista Equity Partners for more than $1 billion in cash, while its Indian arm acquired Bangalore-based Metsys Engineering and Consultancy Pvt Ltd for about Rs8.5 crore. 

ABB India also acquired the unlisted Metsys Engineering and Consultancy Pvt Ltd for about Rs8.5 crore to further strengthen its metal business.