Zurn Elkay Water Solutions Corp 8-K, filed Feb 16, 2021
Zurn Elkay Water Solutions Corp (ZWS)
8-K
2021-02-16
For: 2021-02-16
View Original
Added on
April 12, 2026
About this 8-K
Zurn Elkay Water Solutions Corp filed this 8-K on February 16, 2021.
Items reported
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of Earliest Event Reported): February 16, 2021
| (Exact name of registrant as specified in its charter) | ||
| (State or Other Jurisdiction of Incorporation or Organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
| (Address of Principal Executive Offices) | (Zip Code) | |||||||||||||
(414 ) 643-3739
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 7.01 Regulation FD Disclosure.
On February 16, 2021, Rexnord Corporation (“Rexnord” or the “Company”) and Regal Beloit Corporation (“Regal Beloit”) issued a joint press release announcing the execution of an Agreement and Plan of Merger (the “Merger Agreement”) by and among Rexnord, Land Newco, Inc., a wholly-owned indirect subsidiary of Rexnord, Regal Beloit, and [Merger Sub], a wholly-owned subsidiary of Regal Beloit. A copy of the joint press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
On February 16, 2021, Rexnord and Regal Beloit held a joint investor conference call to discuss the Merger Agreement. A copy of the joint presentation presented during the call is attached hereto as Exhibit 99.2 and is incorporated herein by reference.
Forward-Looking Statements
This communication contains certain “forward-looking statements” including statements regarding the anticipated timing and benefits of the transaction with Regal Beloit (the “Transaction”). The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. The forward-looking statements contained herein are based on Rexnord’s current expectations and beliefs concerning future developments and their potential effects, but there can be no assurance that these will be as anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the control of Rexnord) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These factors include, among others: the inability to complete the Transaction; the inability to recognize the anticipated benefits of the proposed Transaction, including due to the failure to receive required security holder approvals, or the failure of other closing conditions; and costs related to the proposed Transaction. Except as required by law, Rexnord does not undertake any obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Additional Information about the Transaction and Where to Find It
In connection with the Transaction, we and Regal Beloit intend to file relevant materials with the Securities and Exchange Commission (“SEC”), that will include a proxy statement/information statement/prospectus relating to the Transaction. SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT/INFORMATION STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT REXNORD, REGAL BELOIT AND THE TRANSACTION. A definitive proxy statement will be sent to stockholders of Rexnord seeking approval of the Transaction. The documents relating to the Transaction (when they are available) can be obtained free of charge from the SEC’s website at www.sec.gov. These documents (when they are available) can also be obtained free of charge by contacting us (414) 643-3739, or 511 W. Freshwater Way Milwaukee, Wisconsin 53204.
Participants in the Solicitation
This communication is not a solicitation of a proxy from any security holder. Rexnord, Regal Beloit and their respective directors, executive officers, other members of management and employees may be deemed to be participants in the solicitation of proxies from Rexnord’s stockholders in connection with the Transaction. Information regarding the names and interests in the proposed transaction of Rexnord’s directors and officers is contained Rexnord’s filings with the SEC. Additional information regarding the interests of potential participants in the solicitation process will also be included in the proxy statement/information statement/prospectus relating to the Transaction and other relevant documents when they are filed with the SEC. These documents can be obtained free of charge from the sources indicated above.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 104 | Cover Page Inline XBRL data | |||||||
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, Rexnord Corporation has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized this 16th day of February, 2021.
| REXNORD CORPORATION | ||||||||
| By: | /S/ Mark W. Peterson | |||||||
| Mark W. Peterson | ||||||||
| Senior Vice President and Chief Financial Officer | ||||||||
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FOR RELEASE ON: February 16, 2021 REGAL TO COMBINE WITH REXNORD’S PMC SEGMENT, CREATING WORLD-CLASS POWER TRANSMISSION PROVIDER • Combines complementary best-in-class power transmission portfolios to deliver more complete drive train solutions for customers • Re-balances Regal portfolio between Power Transmission (47% of pro forma sales), Motors (38%), and Niche/Specialty Products (15%) • Increases end market and geographic diversity • Accelerates R&D and new product development; enhances digital service and IIOT capabilities • Creates compelling value for shareholders with attractive financial returns and new growth opportunities • Anticipated annualized cost synergies of $120 million by year three, significant revenue cross-marketing opportunities and a strong balance sheet • Unites aligned cultures with deep commitment to 80/20 and LEAN principles BELOIT, WI, & MILWAUKEE, WI, February 16, 2021 – Regal Beloit Corporation (NYSE: RBC) and Rexnord Corporation (NYSE: RXN) today announced that they have reached a definitive agreement whereby Rexnord will separate its Process & Motion Control (“PMC”) segment by way of a tax-free spin-off to Rexnord shareholders and then immediately combine it with Regal in a Reverse Morris Trust (“RMT”) transaction. Regal shareholders will own 61.4% and Rexnord shareholders will own 38.6% of the combined entity (“New Regal”), before a potential dividend to Regal shareholders and a corresponding ownership adjustment to Rexnord shareholders, sized at closing to ensure that RMT ownership requirements are met. Rexnord shareholders will continue to own 100% of the businesses’ Water Management platform. With the addition of PMC, Regal’s 2020 pro forma revenue was approximately $4.1 billion with Adjusted EBITDA of $740 million, excluding $120 million in annualized cost synergies expected to be achieved by year three after closing. The pro forma 2020 EBITDA margin was approximately 18%. The transaction combines Regal and PMC’s best-in-class power transmission portfolios to drive innovation in industrial power transmission and motion control solutions through superior engineering, technology, and manufacturing capabilities. PMC is a world-class provider of specialized, highly-engineered power transmission components and solutions, with a strong portfolio of Industrial Internet of Things (“IIOT”) solutions. The transaction expands Regal’s portfolio, customer reach, and product diversity while creating shareholder value through enhanced growth and substantial cost synergies. “This transformative combination brings together two highly complementary businesses, creating a premier provider of power transmission products, poised to deliver enhanced value for our customers, associates, and shareholders,” said Regal CEO, Louis Pinkham. “Combining with PMC accelerates our transformation momentum and is an important step towards our vision to accelerate profitable growth. We believe this transaction will create meaningful value for customers by providing comprehensive solutions across the entire industrial drive train, increased portfolio and reach, and an enhanced presence in diverse and attractive end markets and geographies. Shareholders will
benefit from compelling value creation and financial benefits, including enhanced growth, cost synergy-driven margin expansion, attractive ROIC, and earnings accretion.” “We have long admired PMC’s products and capabilities, highly-regarded brands, and talented team. Importantly, Regal and PMC are a terrific cultural fit with a shared commitment to integrity, customer success, continuous improvement, and a passion to win. We are confident these shared values and complementary business structures will help facilitate a seamless transition and fuel our continued success.” Todd Adams, Chairman, President and CEO of Rexnord, commented, “This transaction provides clear and compelling value for Rexnord shareholders through ownership in a combined company with enhanced scale and significant growth opportunities. Regal is committed to investing in the continued growth of its power transmission business, and we are confident the PMC platform and team are a perfect fit to accelerate their strategy. Rexnord’s Water Management business will be well-positioned to continue to drive differentiated growth as a standalone business aligned around its distinct competitive advantages and market dynamics.” Key Strategic & Financial Benefits • Creates a premier player in industrial power transmission with complete product portfolio across the entire drive train. The combination with PMC fills gaps in Regal’s PTS portfolio, creates a more compelling partner for distributors, and enables Regal to provide complete drive train solutions across all major applications for customers. In addition, the transaction represents an attractive value proposition for both customers and end users with enhanced service capability breadth, technology content and domain expertise. • Improves end market diversity. Creates new avenues for growth through expanded focus outside of North America. Improves end market diversity, with increased exposure to attractive high-growth end markets including Renewable Energy, Food and Beverage, Automation, Aerospace, and eCommerce. Regal’s combined portfolio is expected to be more balanced, with pro forma 2020 PTS comprising nearly 50% of sales, reducing cyclicality and unlocking greater portfolio flexibility. • Accelerates R&D and digital service capabilities. Combined R&D fuels the growth of next-generation products and faster development of value-added features through enhanced innovation and reinvestment. Provides opportunity to create world-class IIOT and digital experience with the Perceptiv™ and DiRXN® platforms, providing innovative new solutions for customers and end users. • Substantial cost synergies of $120 million by year three, with $70 million realized in year one. Expected synergies to be driven by procurement, distribution efficiencies, footprint rationalization, and SG&A savings. Regal plans to continue robust investment in technology and innovation. • Provides significant immediate and long-term value creation and financial benefits. The transaction provides attractive ROIC and is expected to be accretive to cash EPS in year one after closing. In addition, assuming the mid-point of the expected adjustment mechanism range (described below), Regal shareholders would be expected to receive a dividend of ~$7 per share. The transaction is expected to leave Regal with a strong balance sheet. • Unites aligned cultures with deep commitment to 80/20 and LEAN principles. Shared cultures focused on serving customers and driving efficiency. Talent infusion expected to accelerate 80/20, LEAN, IIOT, and new product development initiatives.
Governance and Locations Upon closing, Regal will be led by its existing Board of Directors with the addition of two new directors from the Rexnord board of directors, mutually agreed upon by Regal and Rexnord. Rakesh Sachdev will continue as non- Executive Chairman of the Board. Regal’s CEO, Louis Pinkham, will lead the combined corporate entity, which will continue to be headquartered in Beloit, Wisconsin. The combined PTS and PMC business will adopt the Rexnord name and be headquartered in Milwaukee, Wisconsin. Regal expects it will continue to maintain, invest in, and grow its presence in Florence, Kentucky, which will remain a strategic site. Rexnord Chairman, President and CEO, Todd Adams, will continue to lead the Water Management business, which plans to remain headquartered in Milwaukee, Wisconsin. Transaction Structure and Closing Conditions Under the terms of the agreement, which has been unanimously approved by the Boards of Directors of both companies, Regal shareholders will own 61.4% and Rexnord shareholders 38.6% in New Regal, before a potential dividend to Regal shareholders and a corresponding ownership adjustment for Rexnord shareholders. The transaction is structured as an RMT and is expected to be tax-efficient to Regal and Rexnord shareholders for U.S. federal income tax purposes. Significant shareholder overlap between Regal and Rexnord shareholders, and the adjustment mechanism, will ensure that the RMT threshold of greater-than-50% ownership by Rexnord shareholders in New Regal, after factoring overlapping shareholders, is met in all circumstances. Based on current information on the size and characteristics of overlapping ownership, there is an expected dividend to Regal shareholders, with a corresponding ownership adjustment for Rexnord shareholders. Based on current information, we expect the dividend to be in the range of $100 to $500 million with a mid-point of $300 million. That midpoint corresponds to ownership in New Regal of 60.0% for Regal shareholders and 40.0% for Rexnord shareholders post dividend. The transaction values PMC at $3.69 billion1, representing 14.2x 2020 Adjusted EBITDA, or 9.7x after factoring run- rate cost synergies. The transaction is subject to regulatory approvals, Regal and Rexnord shareholder approvals, and customary closing conditions, and is expected to close in the fourth quarter of 2021. Conference Call and Investor Information Regal and Rexnord will jointly hold a conference call to discuss the transaction at 7:30 AM CT (8:30 AM ET) on Tuesday, February 16, 2021. To listen to the live audio and view the presentation during the call, please visit Regal’s Investor website: https://investors.Regalbeloit.com. To listen by phone or to ask the presenters a question, dial 1- 888-317-6003 (U.S. callers) or + 1-412-317-6061 (international callers) and enter 9152907# when prompted. A webcast replay will be available at the link above, and a telephone replay will be available at 1-877-344-7529 (U.S. callers) or + 1-412-317-0088 (international callers), using a replay access code of 10152538#. Both will be accessible for three months after the earnings call. 1 Includes $3.32 billion of Regal stock, priced at $128.82 using a 15-day VWAP, issued in the transaction and the assumption of $370 million of net debt, and excludes a $73 million post-tax pension liability to be assumed in the transaction.
A copy of the investor presentation will be made available on Regal and Rexnord investor relations websites in advance of the conference call. Fourth Quarter and Full Year 2020 Earnings Announcements Regal and Rexnord separately announced their Fourth Quarter and Full Year 2020 earnings today and will be hosting separate earnings conference calls, at 9:00 AM CT (10:00 AM ET) and 10:00 AM CT (11:00 AM ET), respectively. Details of these calls can be found in the companies’ separate earnings press releases and on their respective investor relations websites. Advisors Barclays and Incentrum Group are serving as financial advisors to Regal, and Sidley Austin LLP is serving as legal counsel. Barclays is also providing Regal with committed financing for the transaction. Citi and Evercore are serving as financial advisors to Rexnord, and Morgan, Lewis & Bockius LLP is serving as legal counsel. Credit Suisse is providing Rexnord with committed financing for the transaction. About Regal Regal Beloit Corporation (NYSE: RBC) is a global leader in the engineering and manufacturing of electric motors and controls, power generation, and power transmission products, serving customers throughout the world. We create a better tomorrow by developing and responsibly producing energy-efficient products and systems. The Company is comprised of four operating segments: Commercial Systems, Industrial Systems, Climate Solutions and Power Transmission Solutions. Regal is headquartered in Beloit, Wisconsin and has manufacturing, sales, and service facilities worldwide. For more information, visit RegalBeloit.com. About Rexnord Headquartered in Milwaukee, Wisconsin, Rexnord is comprised of two strategic platforms, Process & Motion Control and Water Management, with approximately 6,400 employees worldwide. The Process & Motion Control platform designs, manufactures, markets, and services specified, highly engineered mechanical components used within complex systems. The Water Management platform designs, procures, manufactures and markets products that provide and enhance water quality, safety, flow control and conservation. Additional information about the Company can be found at www.rexnordcorporation.com. Contacts For Regal Investors Robert Barry, VP - Investor Relations 608-361-7530 robert.barry@Regalbeloit.com Media Bryan Locke / Jenny Gore Sard Verbinnen & Co RegalBeloit-SVC@sardverb.com
For Rexnord Investors Rob McCarthy, VP – Investor Relations 414-223-1615 Robert.McCarthy@rexnord.com Media Angela Hersil, Director – Corporate Communications 855-480-5050 Corporate.Communications@Rexnord.com Additional Information This communication does not constitute an offer to buy, or a solicitation of an offer to sell, any securities of Regal Beloit Corporation (“Regal”), Rexnord Corporation (“Rexnord”) or Land Newco, Inc. (“Land”) In connection with the proposed transaction, Regal and Land will file registration statements with the SEC registering shares of Regal common stock and Land common stock in connection with the proposed transaction. Regal’s registration statement will also include a joint proxy statement and prospectus relating to the proposed transaction. Rexnord shareholders are urged to read the joint proxy statement/prospectus-information statement that will be included in the registration statements and any other relevant documents when they become available, and Regal shareholders are urged to read the joint proxy statement/prospectus-information statement and any other relevant documents when they become available, because they will contain important information about Regal, Rexnord, Land and the proposed transaction. The joint proxy statement/prospectus-information statement and other documents relating to the proposed transaction (when they become available) can also be obtained free of charge from the SEC’s website at www.sec.gov. The joint proxy statement/prospectus-information statement and other documents (when they are available) can also be obtained free of charge from Rexnord upon written request to Rexnord Corporation, Investor Relations, 511 Freshwater Way, Milwaukee, WI 53204, or by calling (414) 643-3739 or upon written request to Regal Beloit Corporation, Investor Relations, 200 State Street, Beloit, WI 53511 or by calling (608) 364-8800. Forward Looking Statements This communication contains forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which reflect Regal’s current estimates, expectations and projections about Regal’s future results, performance, prospects and opportunities. Such forward-looking statements may include, among other things, statements about the proposed acquisition of Rexnord’s PMC business (the “PMC Business”), the benefits and synergies of the proposed transaction, future opportunities for Regal, the PMC Business and the combined company, and any other statements regarding Regal’s, the PMC Business’s or the combined company’s future operations, anticipated business levels, future earnings, planned activities, anticipated growth, market opportunities, strategies, competition and other expectations and estimates for future periods. Forward-looking statements include statements that are not historical facts and can be identified by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “plan,” “may,” “should,” “will,” “would,” “project,” “forecast,” and similar expressions. These forward-looking statements are based upon information currently available to Regal and are subject to a number of risks, uncertainties, and other factors that could cause Regal’s, the PMC Business’s or the combined company’s actual results, performance, prospects, or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Important factors that could cause Regal’s, the PMC Business’s or the combined company’s actual results to differ materially from the results referred to in the forward-looking statements Regal makes in this communication include: the possibility that the conditions to the consummation of the transaction will not be satisfied; failure to obtain, delays in obtaining or adverse conditions related to obtaining shareholder or regulatory approvals or the IRS ruling to be sought in connection with the proposed transaction; changes in the extent and characteristics of the common shareholders of
Rexnord and Regal and its effect pursuant to the merger agreement for the transaction on the number of shares of Regal common stock issuable pursuant to the transaction, magnitude of the dividend payable to Regal shareholders pursuant to the transaction and the extent of indebtedness to be incurred by Regal in connection with the transaction; the ability to obtain the anticipated tax treatment of the transaction and related transactions; risks relating to any unforeseen changes to or the effects on liabilities, future capital expenditures, revenue, expenses, synergies, indebtedness, financial condition, losses and future prospects; the possibility that Regal may be unable to achieve expected synergies and operating efficiencies in connection with the transaction within the expected time-frames or at all and to successfully integrate the PMC Business; expected or targeted future financial and operating performance and results; operating costs, customer loss and business disruption (including, without limitation, difficulties in maintain relationships with employees, customers, clients or suppliers) being greater than expected following the transaction; failure to consummate or delay in consummating the transaction for other reasons; Regal’s ability to retain key executives and employees; risks associated with litigation related to the transaction; the continued financial and operational impacts of and uncertainties relating to the COVID-19 pandemic on customers and suppliers and the geographies in which they operate; uncertainties regarding the ability to execute restructuring plans within expected costs and timing; actions taken by competitors and their ability to effectively compete in the increasingly competitive global electric motor, drives and controls, power generation and power transmission industries; the ability to develop new products based on technological innovation, such as the Internet of Things, and marketplace acceptance of new and existing products, including products related to technology not yet adopted or utilized in geographic locations in which we do business; fluctuations in commodity prices and raw material costs; dependence on significant customers; risks associated with global manufacturing, including risks associated with public health crises; issues and costs arising from the integration of acquired companies and businesses and the timing and impact of purchase accounting adjustments; Regal’s overall debt levels and its ability to repay principal and interest on its outstanding debt, including debt assumed or incurred in connection with the proposed transaction; prolonged declines in one or more markets, such as heating, ventilation, air conditioning, refrigeration, power generation, oil and gas, unit material handling or water heating; economic changes in global markets, such as reduced demand for products, currency exchange rates, inflation rates, interest rates, recession, government policies, including policy changes affecting taxation, trade, tariffs, immigration, customs, border actions and the like, and other external factors that Regal cannot control; product liability and other litigation, or claims by end users, government agencies or others that products or customers’ applications failed to perform as anticipated, particularly in high volume applications or where such failures are alleged to be the cause of property or casualty claims; unanticipated liabilities of acquired businesses; unanticipated adverse effects or liabilities from business exits or divestitures; unanticipated costs or expenses that may be incurred related to product warranty issues; dependence on key suppliers and the potential effects of supply disruptions; infringement of intellectual property by third parties, challenges to intellectual property, and claims of infringement on third party technologies; effects on earnings of any significant impairment of goodwill or intangible assets; losses from failures, breaches, attacks or disclosures involving information technology infrastructure and data; cyclical downturns affecting the global market for capital goods; and other risks and uncertainties including, but not limited, to those described in Regal’s Annual Report on Form 10-K on file with the Securities and Exchange Commission and from time to time in other filed reports including Regal’s Quarterly Reports on Form 10-Q. For a more detailed description of the risk factors associated with Regal, please refer to Regal’s Annual Report on Form 10-K for the fiscal year ended December 28, 2019 on file with the Securities and Exchange Commission and its Quarterly Report on Form 10-Q for the period ended September 26, 2020 and subsequent SEC filings. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this communication are made only as of the date of this communication, and Regal undertakes no obligation to update any forward-looking information contained in this communication or with respect to the announcements described herein to reflect subsequent events or circumstances. Participants in the Solicitation
This communication is not a solicitation of a proxy from any security holder of Regal. However, Rexnord, Regal and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from shareholders of Rexnord and Regal in connection with the proposed transaction under the rules of the SEC. Information about the directors and executive officers of Rexnord may be found in its Annual Report on Form 10-K filed with the SEC on May 12, 2020 and its definitive proxy statement relating to its 2020 Annual Meeting filed with the SEC on June 5, 2020. Information about the directors and executive officers of Regal may be found in its Annual Report on Form 10-K filed with the SEC on February 26, 2020, and its definitive proxy statement relating to its 2020 Annual Meeting filed with the SEC on March 19, 2020. NON-GAAP MEASURES AND OTHER DEFINITIONS In this news release, we disclose the following non-GAAP financial measures: adjusted EBITDA, EBITDA margin, return on invested capital (ROIC) and cash earnings per share (EPS). As used in this communication, we define: (i) “adjusted EBITDA” to mean: earnings before interest, taxes, depreciation, acquisition related amortization, acquisition related costs, restructuring and related costs, stock-based compensation, asset impairment and other income or charges that management does not consider to be directly related to operating performance, (ii) “EBITDA margin” to mean: Adjusted EBITDA as a percentage of net sales, (iii) “return on invested capital” to mean: after-tax adjusted operating income before amortization divided by invested capital and (iv) “cash earnings per share” to exclude acquisition related amortization, acquisition related costs, restructuring and related costs, asset impairment and other income or charges that management does not consider to be directly related to operating performance. Not all companies use these terms in consistent ways and you should not assume that the manner in which we use these terms is consistent with any other company. This additional information is not meant to be considered in isolation or as a substitute for results of operations prepared and presented in accordance with GAAP.
©2021 Regal Beloit Corporation 1 F e b r u a r y 1 6 , 2 0 2 1 Regal Beloit to Combine with Rexnord’s Process & Motion Control Segment CREATING A PREMIE R GLO BAL POWER TRANSMIS S I O N PROVID ER
©2021 Regal Beloit Corporation 2 Additional Information This communication does not constitute an offer to buy, or a solicitation of an offer to sell, any securities of Regal Beloit Corporation (“Regal”), Rexnord Corporation (“Rexnord”) or Land Newco, Inc. (“Land”) In connection with the proposed transaction, Regal and Land will file registration statements with the SEC registering shares of Regal common stock and Land common stock in connection with the proposed transaction. Regal’s registration statement will also include a joint proxy statement and prospectus relating to the proposed transaction. Rexnord shareholders are urged to read the joint proxy statement/prospectus-information statement that will be included in the registration statements and any other relevant documents when they become available, and Regal shareholders are urged to read the joint proxy statement/prospectus-information statement and any other relevant documents when they become available, because they will contain important information about Regal, Rexnord, Land and the proposed transaction. The joint proxy statement/prospectus-information statement and other documents relating to the proposed transaction (when they become available) can also be obtained free of charge from the SEC’s website at www.sec.gov. The joint proxy statement/prospectus-information statement and other documents (when they are available) can also be obtained free of charge from Rexnord upon written request to Rexnord Corporation, Investor Relations, 511 Freshwater Way, Milwaukee, WI 53204, or by calling (414) 643-3739 or upon written request to Regal Beloit Corporation, Investor Relations, 200 State Street, Beloit, WI 53511 or by calling (608) 364-8800. Forward Looking Statements This communication contains forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which reflect Regal’s current estimates, expectations and projections about Regal’s future results, performance, prospects and opportunities. Such forward-looking statements may include, among other things, statements about the proposed acquisition of Rexnord’s PMC business (the “PMC Business”), the benefits and synergies of the proposed transaction, future opportunities for Regal, the PMC Business and the combined company, and any other statements regarding Regal’s, the PMC Business’s or the combined company’s future operations, anticipated business levels, future earnings, planned activities, anticipated growth, market opportunities, strategies, competition and other expectations and estimates for future periods. Forward-looking statements include statements that are not historical facts and can be identified by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “plan,” “may,” “should,” “will,” “would,” “project,” “forecast,” and similar expressions. These forward-looking statements are based upon information currently available to Regal and are subject to a number of risks, uncertainties, and other factors that could cause Regal’s, the PMC Business’s or the combined company’s actual results, performance, prospects, or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Important factors that could cause Regal’s, the PMC Business’s or the combined company’s actual results to differ materially from the results referred to in the forward-looking statements Regal makes in this communication include: the possibility that the conditions to the consummation of the transaction will not be satisfied; failure to obtain, delays in obtaining or adverse conditions related to obtaining shareholder or regulatory approvals or the IRS ruling to be sought in connection with the proposed transaction; changes in the extent and characteristics of the common shareholders of Rexnord and Regal and its effect pursuant to the merger agreement for the transaction on the number of shares of Regal common stock issuable pursuant to the transaction, magnitude of the dividend payable to Regal shareholders pursuant to the transaction and the extent of indebtedness to be incurred by Regal in connection with the transaction; the ability to obtain the anticipated tax treatment of the transaction and related transactions; risks relating to any unforeseen changes to or the effects on liabilities, future capital expenditures, revenue, expenses, synergies, indebtedness, financial condition, losses and future prospects; the possibility that Regal may be unable to achieve expected synergies and operating efficiencies in connection with the transaction within the expected time-frames or at all and to successfully integrate the PMC Business; expected or targeted future financial and operating performance and results; operating costs, customer loss and business disruption (including, without limitation, difficulties in maintain relationships with employees, customers, clients or suppliers) being greater than expected following the transaction; failure to consummate or delay in consummating the transaction for other reasons; Regal’s ability to retain key executives and employees; risks associated with litigation related to the transaction; the continued financial and operational impacts of and uncertainties relating to the COVID- 19 pandemic on customers and suppliers and the geographies in which they operate; uncertainties regarding the ability to execute restructuring plans within expected costs and timing; actions taken by competitors and their ability to effectively compete in the increasingly competitive global electric motor, drives and controls, power generation and power transmission industries; the ability to develop new products based on technological innovation, such as the Internet of Things, and marketplace acceptance of new and existing products, including products related to technology not yet adopted or utilized in geographic locations in which we do business; fluctuations in commodity prices and raw material costs; dependence on significant customers; risks associated with global manufacturing, including risks associated with public health crises; issues and costs arising from the integration of acquired companies and businesses and the timing and impact of purchase accounting adjustments; Regal’s overall debt levels and its ability to repay principal and interest on its outstanding debt, including debt assumed or incurred in connection with the proposed transaction; prolonged declines in one or more markets, such as heating, ventilation, air conditioning, refrigeration, power generation, oil and gas, unit material handling or water heating; economic changes in global markets, such as reduced demand for products, currency exchange rates, inflation rates, interest rates, recession, government policies, including policy changes affecting taxation, trade, tariffs, immigration, customs, border actions and the like, and other external factors that Regal cannot control; product liability and other litigation, or claims by end users, government agencies or others that products or customers’ applications failed to perform as anticipated, particularly in high volume applications or where such failures are alleged to be the cause of property or casualty claims; unanticipated liabilities of acquired businesses; unanticipated adverse effects or liabilities from business exits or divestitures; unanticipated costs or expenses that may be incurred related to product warranty issues; dependence on key suppliers and the potential effects of supply disruptions; infringement of intellectual property by third parties, challenges to intellectual property, and claims of infringement on third party technologies; effects on earnings of any significant impairment of goodwill or intangible assets; losses from failures, breaches, attacks or disclosures involving information technology infrastructure and data; cyclical downturns affecting the global market for capital goods; and other risks and uncertainties including, but not limited, to those described in Regal’s Annual Report on Form 10-K on file with the Securities and Exchange Commission and from time to time in other filed reports including Regal’s Quarterly Reports on Form 10-Q. For a more detailed description of the risk factors associated with Regal, please refer to Regal’s Annual Report on Form 10-K for the fiscal year ended December 28, 2019 on file with the Securities and Exchange Commission and its Quarterly Report on Form 10-Q for the period ended September 26, 2020 and subsequent SEC filings. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this communication are made only as of the date of this communication, and Regal undertakes no obligation to update any forward-looking information contained in this communication or with respect to the announcements described herein to reflect subsequent events or circumstances. Participants in the Solicitation This communication is not a solicitation of a proxy from any security holder of Regal. However, Rexnord, Regal and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from shareholders of Rexnord and Regal in connection with the proposed transaction under the rules of the SEC. Information about the directors and executive officers of Rexnord may be found in its Annual Report on Form 10- K filed with the SEC on May 12, 2020 and its definitive proxy statement relating to its 2020 Annual Meeting filed with the SEC on June 5, 2020. Information about the directors and executive officers of Regal may be found in its Annual Report on Form 10-K filed with the SEC on February 26, 2020, and its definitive proxy statement relating to its 2020 Annual Meeting filed with the SEC on March 19, 2020. CAUTIONARY STATEMENTS
©2021 Regal Beloit Corporation 3 NON-GAAP FINANCIAL MEASURES; CERTAIN FINANCIAL METRICS In this presentation, we disclose the following non-GAAP financial measures: adjusted EBITDA, EBITDA margin, return on invested capital (ROIC), unlevered free cash flow, net leverage, net debt and cash earnings per share (EPS). As used in this communication, we define: (i) “adjusted EBITDA” to mean: earnings before interest, taxes, depreciation, acquisition related amortization, acquisition related costs, restructuring and related costs, stock-based compensation, asset impairment and other income or charges that management does not consider to be directly related to operating performance, (ii) “EBITDA margin” to mean: adjusted EBITDA as a percentage of net sales, (iii) “return on invested capital” to mean: after-tax adjusted operating income before amortization divided by invested capital, (iv) “unlevered free cash flow” to mean net cash provided by operating activities less additions to property, plant and equipment, excluding interest expenses and taxes thereon, (v) “net leverage” to mean net debt divided by adjusted EBITDA, (vi) “net debt” to mean the sum of financial liabilities less cash and cash equivalents and (vii) “cash earnings per share” to exclude acquisition related amortization, acquisition related costs, restructuring and related costs, asset impairment and other income or charges that management does not consider to be directly related to operating performance. Not all companies use these terms in consistent ways and you should not assume that the manner in which we use these terms is consistent with any other company. This additional information is not meant to be considered in isolation or as a substitute for results of operations prepared and presented in accordance with GAAP. Certain Financial Metrics: The transaction described in this presentation is structured to provide an economic allocation to Regal and Rexnord shareholders of 61.4% and 38.6%, respectively, and to ensure tax-free treatment. To ensure the tax free-treatment, the parties have agreed that, taking into account overlapping shareholder ownership that may be used for tax purposes, post- transaction Rexnord shareholders would, for tax purposes, own 50.8% of the combined company. Because the amount of shareholder overlap that may be used for tax purposes depends on a number of factors that will not be known until closing, the transaction includes an adjustment mechanism to achieve that tax ownership level. Any adjustment would result in a change to the 61.4%/38.6% ownership allocation and preserve the 61.4/38.6 economic allocation by increasing the number of shares issued to Rexnord shareholders and providing a corresponding dividend to Regal shareholders. For purposes of this presentation, based on current information, we have used the illustrative mid-point of an assumed range of a $100 million to $500 million dividend adjustment and corresponding ownership adjustment. The following financial metrics included in this presentation are based on that illustrative mid-point $300 million.”
©2021 Regal Beloit Corporation 4 TODAY’S PRESENTERS Louis Pinkham Chief Executive Officer Rob Rehard Chief Financial Officer Todd Adams Chairman, President & Chief Executive Officer
©2021 Regal Beloit Corporation 5 THE NEW REGAL – TRANSFORMED STRATEGICALLY AND FINANCIALLY Together, a new Regal creating increased value for customers, investors, and associates Creates world-class power transmission provider Will combine with Regal PTS; maintain Rexnord name and HQ in Milwaukee, WI Compelling value creation and financial returns* ROIC >10%1 by Year 5, EPS accretion2, a path to >500bps of EBITDA margin expansion and leverage of ~1.1x $120M in cost synergies and significant customer benefits Additional upside from cross-marketing opportunities; customers benefit from complete drive train solutions and accelerated R&D and digital solutions Heavy-weight and critical power transmission applications, with established IOT offering Light-weight power transmission space, with strong distributor and e-commerce channels Global leader in electric motors and controls & power generation Process & Motion Control (PMC) 1 Including cost and cross-selling synergies 2 Calculated using adjusted EPS pre intangible amortization *EPS accretion and leverage are based on the illustrative mid-point of the assumed adjustment mechanism range described in this presentation
©2021 Regal Beloit Corporation 6 1 Adjusted EBITDA excluding stock-based compensation. Pro forma Adjusted EBITDA includes $70M of cost synergies in 2022E and $120M in 2024E 2 Numbers shown at the $300M dividend midpoint case. Pre-dividend, accretion to non-GAAP adj. cash EPS expected to be ~3% in full year 1 post closing. In the expected dividend range, cash EPS expected to be ~2% accretive plus a ~$2 dividend at the low end, and ~2% dilutive plus a ~$12 dividend at the high end. Expecting meaningful accretion to cash EPS in year 2 across the expected dividend range of ~$100 - $500M. 3 Non-GAAP adjusted “Cash” EPS is adjusted for amortization of intangibles and restructuring expenses 4 Including cost and cross-selling synergies COMPELLING VALUE CREATION FOR ALL SHAREHOLDERS $4.1B Sales ~$740M Adj. EBITDA1 ~18% EBITDA Margin Attractive Financial Impact Pro Forma 2020Pro Forma 2019 Pro Forma 2022 $4.5B Sales ~$940M Adj. EBITDA1 ~21% EBITDA Margin $4.6B Sales ~$800M Adj. EBITDA1 ~18% EBITDA Margin + Process & Motion Control (PMC) 33%+ Combined 2022E gross margin >500bps Adj. EBITDA1 margin expansion by 2024E Accretive2 + Dividend Accretive to cash EPS in year 13, increasing thereafter, plus ~$7 / share dividend2 ~1.1x2 Pro forma 2021E net leverage $120M Synergies anticipated by year 3; $70M in year 1 >10%4 ROIC by year 5
©2021 Regal Beloit Corporation 7 Structure & Ownership • Regal to combine with Rexnord’s PMC business in a tax-efficient Reverse Morris Trust (RMT) transaction valued at $3,688M1 • Economic allocation of 61.4% for Regal shareholders and 38.6% for Rexnord shareholders with potential for an ownership and dividend adjustment to preserve tax-free treatment (“Adjustment Mechanism”) − Significant shareholder overlap, together with an ownership adjustment mechanism, ensures that the RMT hurdle of 50%+ for Rexnord shareholders, measured at closing, is met − Regal assumes $370M in net debt2 − Transaction values PMC at 14.2x 2020 Adjusted EBITDA3 or 9.7x including run-rate cost synergies Adjustment Mechanism • The adjustment mechanism will ensure the transaction meets applicable RMT requirements − The dividend and corresponding ownership will be adjusted based on shareholder overlap at close to ensure that the RMT threshold is met • Based on current information, we have assumed a $100M – $500M dividend4 to Regal shareholders and a corresponding adjustment of the ownership − At the illustrative $300M midpoint dividend, ownership split would be 60.0% / 40.0% − In the event that all overlap disappears or in the absence of a tax ruling from the IRS, the dividend4 could be as high as ~$1,950M with a corresponding ownership change to 49.9% for Regal shareholders and 50.1% for Rexnord shareholders Merged Company • Company name: Regal; Listing: NYSE (RBC) − Combined Regal PTS segment and Rexnord PMC to operate with a diverse portfolio of iconic brands, including Rexnord − Group headquarters to remain in Beloit, WI − Segment headquarters to be established in Milwaukee, WI; presence in Florence, KY, will remain a strategic site Management & Board of Directors • Regal CEO, CFO, and joint management team to lead the combined entity • Rakesh Sachdev to continue as non-Executive Chairman of the Board • Regal to enlarge its Board by two members to be nominated by Rexnord Timing • Expected to close in fourth quarter 2021 • Subject to regulatory approvals, Regal and Rexnord shareholder approvals, and customary closing conditions TRANSACTION SUMMARY 1 Excludes post-tax pension liability of $73M to be assumed by Regal 2 Assumed net debt includes new debt on PMC to fund a dividend to Rexnord of $487M intended to reduce the leverage at Rexnord’s RemainCo business, capital leases of $76M and cash of $193M 3 Adjusted EBITDA excluding stock-based compensation 4 With a corresponding ownership for Regal shareholders of 60.9% to 59.0%. Dividend to be based on Regal’s 15-day VWAP as of $128.82 as of February 12, 2021
©2021 Regal Beloit Corporation 8 SIGNIFICANT VALUE UNLOCKED FOR REXNORD SHAREHOLDERS Significant ownership in highly-attractive combined PT business Compelling value creation opportunity for all stakeholders Strong cultural fit between logical partners Creates standalone best-in-class water management business Regal the clear “best fit” partner for Rexnord PMC
©2021 Regal Beloit Corporation 9 STRATEGIC TRANSACTION WITH COMPELLING VALUE CREATION Creates a premier power transmission player, combining highly complementary portfolios Generates significant cost synergies, worth at least $120M annually Cross marketing opportunities improve growth potential and provide upside beyond cost synergies ROIC expected to exceed 10% by year 5 Accretive to cash EPS in year 1, increasing meaningfully thereafter. In addition, ~$7 dividend per share Accelerates digital strategy, better situating Regal for the future Rebalances Regal portfolio, investing in power transmission and ESG-related business Robust free cash flow generation and a strong balance sheet Rooted in a strong shared culture, focused on serving customers and driving efficiency
©2021 Regal Beloit Corporation 10 DELIVERING UNMATCHED CAPABILITIES ACROSS THE ENTIRE GENERAL INDU STRIAL DRIVE TRAIN Full drive train brings opportunity to increase value to customers Clutches Brakes Motors Mounted Bearings Sensing Fluid Couplings Gear Drives Grid Couplings Monitoring Mounted Bearings Shaft Lock Disc CouplingsComplementary offerings, adding real value to customers: • Engineered to work better together • Reduced complexity in certification • Integrated support and services Sensing
©2021 Regal Beloit Corporation 11 Regal Strength PMC Strength Couplings High-performance disc couplings Broad standard-purpose grid & gear couplings Gearing Right-angle worm gears Large parallel gear drives Mounted bearings Light/medium-duty ball bearings Heavy-duty roller bearings Aero Niche rotating wing critical application bearings General fixed wing bearings and seals Conveyance Expanding into unit material handling Expanding into food IOT Platform Strength in monitoring and diagnostics Proven commercialization muscle PORTFOLIOS WITH HIGHLY COMPLEMENTARY PRODUCTS AND SOLUTIONS Regal’s lighter-duty plus PMC’s heavier-duty portfolio create a more complete offering Product Segment
©2021 Regal Beloit Corporation 12 RESULTS IN PREMIER POWER TRANSMISSION PLAYER ~30% outside of N.A. Regal Brands PMC Brands 19% 11% 70% Europe Rest of World N.A. Pro Forma 2020 PT Revenue by End Market Pro Forma 2020 PT Revenue by Geography 26% 17% 11% 9% 7% 7% 6% 5% 4% 8% G.I. F&B Metals/mining A&D Non-res Alt. E Power Whse. O&G Other Brand strength across wide range of end markets and geographies Greater End Market Diversity
©2021 Regal Beloit Corporation 13 UNLOCKS MEANINGFUL SYNERGIES 2022 2023 2024 Procurement Footprint SG&A $70 $120 $100 Significant Cost Synergies1 ($M) • Capabilities across the drive train • Cross-selling opportunities • Expanded geographies • Enhanced aftermarket support • Strengthens digital capabilities Synergy level is best-in-class across L10Y capital goods transactions2 Significant Cross-Marketing Synergies 1 Estimated one-time costs of ~$120M to achieve 2 $120M in cost synergies is 10% of Rexnord MC LTM revenue
©2021 Regal Beloit Corporation 14 DRIVES GROWTH VIA IMPROVED VALUE PROPOSITION Combined capabilities accelerate innovation, new product introductions A better partner to distributors of all sizes Provide access to a larger installed base and the most complete power transmission product and solution set Enhanced service capabilities Better service levels through expanded flexible global manufacturing network, more robust aftermarket support Accelerate R&D to deliver better products faster Products engineered to work better together across entire drive train Cross-selling to shared customer base Harness proven technologies across combined customer base to support increased volume
©2021 Regal Beloit Corporation 15 COMPLEMENTARY OFFERINGS CREATE FULL-LIFECYCLE SUPPORT + Adds value for customers by: • Asset Management • Improved Asset Performance • Increased Component Reliability • Lower Operating Cost Diagnose Procure Install Monitor Repair Replace Operate Search Educate & Design Select Full digital coverage of customer lifecycle Maintain
©2021 Regal Beloit Corporation 16 BROADER CAPABILITIES TO DRIVE INNOVATION Make it Easier to Order Augmented Reality Predictive Analytics Seamless Transactions Guided digital handoffs between end user, channel partners, and Regal to minimize leakage Interactive Environment Provide real time insight on the Performance, Reliability, and Operation of assets and components Prognostic Action Deploy products and services Just-In- Time to keep the end user in operation Better leverage IT across various customer touch points
©2021 Regal Beloit Corporation 17 70% 30% OE AM Product Mix (2020 Sales) 55% 24% 21% Motors PT Niche / Specialty Regal CREATES MORE BALANCED REGAL PORTFOLIO Regal 38% 47% 15% Motors PT Niche / Specialty Regal + PMC Original Equipment vs. Aftermarket Mix (2020 Sales) 66% 34% OE AM Regal + PMC Power Transmission to contribute almost 50% of Regal sales
©2021 Regal Beloit Corporation 18 ESG Enabling Products & Solutions1 52-57% 43-48% Other ESG Regal EXPANDED ENERGY EFFICIENCY PLATFORM Regal + PMC Majority of Regal sales to come from ESG enabling products and services (2020 Sales) (2022E Sales) 40-45% 55-60% Other ESG Grove Gear Drive Helps save 30 megatons CO2 /year by increasing power production 15-25% Kop-Flex PowerlignTM Torque Monitoring Reduces power plant’s noxious emissions by 2-3% annually Dry Run Conveyance Systems In 2020, dry run solutions saved 163 million gallons of water globally Centa Couplings for Wind Couplings and related components enabled output equivalent of 36,000 wind turbines 1 Includes products and services that deliver energy efficiency, support renewable technologies, and deliver waste reduction
©2021 Regal Beloit Corporation 19 ROBUST CASH FLOW GENERATION 2020F ~$200 2020F Pro forma 2020E Pro forma 2024E ~$750 ~$590 ~$390 27% Accelerating Cash Flow Generation Continued Disciplined Capital Allocation Unlevered Free Cash Flow ($M) Investments for organic growth Continued return of capital to shareholders via dividends and share purchases Strategic bolt-on M&A with focus on fit, synergies, attractive returns Process & Motion Control (PMC) Synergy contribution1 Maintaining balanced approach to capital deployment 1 Net of cost to achieve
©2021 Regal Beloit Corporation 20 OWNERSHIP ADJUSTMENT MECHANISM 1 Dividend to be based on Regal’s 15-day VWAP of $128.82 as of February 12, 2021 2 Based on common shares 3 Adjusted EPS pre intangible amortization. EPS accretion refers to first year post closing 4 Including cost and cross-selling synergies 5 Net leverage inclusive of $193M of cash, $76M of capital leases, and debt to fund $487M dividend to Rexnord. PF 2021E EBITDA incl. of 50% of run-rate synergies. Excludes post-tax pension liability of $73M to be assumed by Regal. 6 In the event that all overlap disappears or the absence of a tax ruling from the IRS, the dividend could be as high as ~$1,950M with a corresponding ownership change to 49.9% for Regal shareholders and 50.1% for Rexnord shareholders • Transaction structure with dividend determined at closing ensures transaction meets RMT ownership requirements in all circumstances • The companies will seek a private letter ruling from the IRS − Size of dividend and corresponding ownership adjustment will depend on measuring identifiable overlapping shareholders at closing • Majority of overlapping shareholder base has been stable over time • Based on current information, we have used an assumed range of $100M – $500M dividend1 to Regal shareholders and a corresponding adjustment of the ownership6 Ownership and Dividend to be Adjusted Based on Available Shareholder Overlap at Closing Illustrative Dividend to Regal Shareholders (1) $100M $300M $500M Rexnord Shareholder Ownership (Pre-Dividend) (2) 38.6% 38.6% 38.6% Rexnord Shareholder Ownership (Post-Dividend) (2) 39.1% 40.0% 41.0% Regal Shareholder Ownership (Post-Dividend) (2) 60.9% 60.0% 59.0% PF Cash EPS Accretion 2022E (3) 1.8% + $2 / Dividend 0.2% + $7 / Dividend (1.5%) + $12 / Dividend 2023E (3) 8% 6% 4% 2024E (3) 10% 9% 7% Year 5 ROIC (4) 10%+ 10%+ 10%+ PF 2021 Net Leverage (5) 0.9x 1.1x 1.3x
©2021 Regal Beloit Corporation 21 STRONGLY ALIGNED CULTURES AND MISSION We create a better tomorrow by energy-efficiently converting power into motion Integrity Customer success Continuous improvement A passion to win
©2021 Regal Beloit Corporation 22 STRATEGIC TRANSACTION WITH COMPELLING VALUE CREATION Creates a premier power transmission player, combining highly complementary portfolios Generates significant cost synergies, worth at least $120M annually Cross marketing opportunities improve growth potential and provide upside beyond cost synergies ROIC expected to exceed 10% by year 5 Accretive to cash EPS in year 1, increasing meaningfully thereafter. In addition, ~$7 dividend per share Accelerates digital strategy, better situating Regal for the future Rebalances Regal portfolio, investing in power transmission and ESG-related business Robust free cash flow generation and a strong balance sheet Rooted in a strong shared culture, focused on serving customers and driving efficiency