Regal Completes Merger With Rexnord PMC, Creating Regal Rexnord Corporation, Accelerating Its Transformation Into A Faster-Growing, More Profitable Enterprise

Today, Regal Rexnord Corporation announced that it has completed the merger of Regal Beloit Corporation with Rexnord Corporation’s Process & Motion Control Business (“PMC”) closing the deal that was signed on February 15, 2021.

• Merger Creates More Balanced Portfolio With Mechanical Power Transmission Nearly 50% Of Sales
• Substantial Growth Opportunities From Selling Industrial Powertrain Solutions Engineered To Raise Energy Efficiency And Customer Productivity
• Committed To Energy Efficiency Always Being Top Of Mind – The New Regal Rexnord Will Now Derive Significantly More Of Its Sales From ESG-Enabling Products And Solutions
• Reiterating Anticipated 2022 Revenue Of Approximately $5.0 Billion
• Reiterating Anticipated Cost Synergies Of At Least $120 Million Over 3 Years
• Reiterating Expected 2022 Adjusted EBITDA Over $1 Billion
• Pro Forma Leverage Of Less Than 1.0x Estimated 2021 Net Debt/EBITDA
• Special Cash Dividend Of $6.99 Per Share Paid To RBC Shareholders On October 5th, In The Aggregate Worth Approximately $284 Million
• Regal Beloit Corporation Renamed Regal Rexnord Corporation
• Former RBC Shares Will Trade As RRX Beginning October 5^th

CEO Louis Pinkham commented, “The addition of PMC is a tremendous positive step forward in Regal’s ongoing transformation, positioning our company – the new Regal Rexnord – better than ever before, to create significant value for all our key stakeholders. We will provide the industry’s most complete Industrial Powertrain solutions – comprised of our high-efficiency motors and critical power transmission components – to enable a range of efficiency and productivity gains for our customers. Our shareholders will benefit from a business that we expect will be faster-growing, higher-margin and more cash generative. And Regal Rexnord associates will benefit from being part of an enterprise that is eager to continue building momentum by investing for growth, particularly by investing in our associates.”

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“Merging with PMC also positions Regal Rexnord to better fulfill our business purpose – creating a better tomorrow by energy-efficiently converting power into motion. We will do this by providing more energy-efficient systems and solutions, developed with greater intention, that work better together across the power train, especially by leveraging voice of the customer to inform our innovation efforts. And we will also improve our cost position by, among other things, working to reduce our manufacturing footprint, leveraging the scale of our purchasing and consuming fewer resources in our production processes. Said another way, we will succeed by driving innovation with purpose – purposeful for our customers and purposeful for our planet.”

The merger is expected to:

• Benefit Regal Rexnord customers: More robust solutions across the industrial powertrain, a broader component offering, enhanced digital and IoT capabilities, investments in domain expertise across a broader set of end market verticals, and a more flexible global manufacturing footprint that boosts product availability and service levels are some of the ways the new Regal Rexnord will be positioned to be a stronger and more collaborative partner to its customers.
  
  While merger benefits initially may be more pronounced in the power transmission business, all customers are expected to benefit over time. Enhanced financial and technological capabilities can make Regal Rexnord an even more capable partner. Legacy Regal’s expertise in motors, air moving and refrigeration technologies, plus an enhanced capability in power transmission, can lead to more value-added solutions relevant to customers across the business.
• Accelerate organic growth: Selling more robust, integrated solutions across the industrial powertrain should provide significant outgrowth opportunities. Engineering electromechanical components to work better together in optimized solutions can lead to improved operating performance, including greater energy efficiency. It’s also particularly value-added to customers at a time when many are looking to outsource more of their engineering activities, often in light of challenges when it comes to recruiting and retaining in-house engineers.
  
  Beyond the industrial powertrain, significant opportunities exist for cross-selling, developing domain expertise in a wider range of end markets, expanding the IoT and digital solution set and leveraging 80/20 to direct the combined organization’s resources to the highest value opportunities.
  
  In the near-term, as supply chains are constrained and component availability can be an obstacle to growth, being able to leverage the operational strength and inventory of the combined organization should give Regal Rexnord a product availability and service level advantage with customers.
• Drive sizable further margin gains: In addition to the significant, ongoing restructuring that has been underway at legacy Regal, which has resulted in material margin expansion over the last two years, including hitting the Company’s “300-in-3” margin expansion program goal over a year ahead of schedule, the new Regal Rexnord expects to realize $120 million of cost synergies over the next three years related to the merger with PMC. The merger synergies are expected to drive over 500 basis points of adjusted EBITDA margin expansion by 2024.
• Strengthen Free Cash Flow: The combination of the expected improved organic growth, significant cost synergies, plus opportunities around working capital and leveraging the combined legacy Regal and PMC manufacturing footprints to improve capital expenditure efficiency should drive improved free cash flow. More detail related to cash flow expectations will be provided in due course, but it is expected that the new Regal Rexnord will be able to consistently deliver cash flow conversion rates above 100%.

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• Raise ROIC: Stronger growth, margins and more efficient use of working capital and capital expenditures are expected to drive return on capital higher – to greater than 10% by Year 5. Further upside to Regal Rexnord’s ROIC is anticipated from growth, cost-out and lean initiatives that were already underway at legacy Regal and Rexnord PMC.
• Result in a stronger One Regal Rexnord team: The company’s new name, Regal Rexnord Corporation, signifies bringing together the complementary strengths of two industry leading businesses and highlights their now common future as a leader in the engineering and manufacturing of power transmission solutions and high-efficiency electric motors and systems.
• Create opportunities for associates: Regal Rexnord associates will benefit from being part of a more profitable and faster growing enterprise that is eager to continue building momentum by investing in the business, in particular by investing in its associates.
• Help the planet at large: Regal Rexnord helps make modern life possible, by providing critical components and integrated solutions that support a range of necessary applications across the HVAC, agriculture, foodservice, mining, manufacturing and ecommerce end markets – to name just a few. A primary goal, and also a Regal Rexnord Value, is driving innovation with purpose. That means listening to, and collaborating with customers to create products and solutions they value. It also means subscribing to a larger purpose – playing a part in helping the environment, by insuring that raising the bar on energy efficiency remains a fundamental component of all research, new product development and engineering efforts. In turn, purposeful innovation contributes to achieving Regal Rexnord’s business purpose – creating a better tomorrow by energy-efficiently converting power into motion.

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