Nidec to Buy Emerson Electric's Motors Assets to Expand U.S. Auto Business

Nidec Corp., the world’s biggest maker of disk-drive motors, agreed to buy Emerson Electric Co.’s motor and controls unit to expand its home appliance and automobile businesses in the U.S.

The transaction, to be paid for in cash, is scheduled to be completed by Sept. 30, the Kyoto-based company said today in a statement. Financial terms weren’t disclosed. The Nikkei newspaper reported earlier the acquisition will cost between 60 billion yen ($702 million) and 70 billion yen.

The Japanese maker of mini motors for computers is looking to more than triple sales by expanding into home appliances outside Asia, according to the statement. The acquisition follows Nidec’s purchase in January of Italy’s Sole Motors and will give it factories, research facilities and 6,000 workers in the U.S., U.K., Mexico and China, the statement said.

“The acquisition has obvious synergies for Nidec and is well in line with the company’s identity as a motor maker,” said Keita Wakabayashi, a Tokyo-based analyst at Mito Securities Co. Nidec “is spending its cash on future growth, something the market clearly welcomes.”

Nidec rose 3.4 percent to close at 7,390 yen on the Osaka Securities Exchange while the benchmark Nikkei 225 Stock Average gained 0.9 percent. The shares have declined 13 percent this year.

Photographer: Tomohiro Ohsumi/Bloomberg

Shigenobu Nagamori, president of Nidec Corp. Close

Shigenobu Nagamori, president of Nidec Corp.

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Photographer: Tomohiro Ohsumi/Bloomberg

Shigenobu Nagamori, president of Nidec Corp.

2 Trillion Yen Sales

The deal, Nidec’s 14th in 5 years, is part of its strategy to use mergers and acquisitions to boost annual sales to 2 trillion yen by the year ending March 2016, the statement said. Nidec reported net income of 52 billion yen last year on revenue of 587 billion yen.

Recent gains in the yen against the dollar have also bolstered Nidec’s buying power, President Shigenobu Nagamori said at a briefing.

“This time the stronger yen worked to our advantage, but we aim to diversify our operations and build a company resistant to exchange-rate fluctuations,” he said.

The Japanese currency reached a 15-year high of 84.73 per dollar on Aug. 11. The yen climbed to 85.44 per dollar a.m. in New York, from 85.53 yesterday.

Nidec plans to buy another company by March 2012 buy and has several potential targets, Nagamori said, without specifying.

“We would consider an unprofitable Japanese company as an acquisition candidate, while U.S. targets will have to be in the black,” Nagamori said.

Emerson’s Motors Revenue

The motor business at Emerson, the St. Louis-based maker of InSinkErator-brand garbage disposals, had net sales equivalent to about 71 billion yen, the statement said. The unit specializes in larger motors used in factory equipment and air conditioners and is developing components for electric and hybrid vehicles, products that complement Nidec’s current lineup, according to the statement.

“We intend to scale up our home appliance motor business with a renewed focus on research and development, manufacturing and sales activities,” with the acquisition, Nidec said in the statement.

The company had 123 billion yen of cash or marketable securities on hand as of March 31, according to Bloomberg data.

Precision motors used inside components such as hard-disk drives and computer fans accounted for 56 percent of Nidec’s sales in the fiscal year ended March 31, while electronic and optical components made up 18 percent of revenue, Bloomberg data show. During the period, Nidec got 90 percent of its sales in Japan and Asia, the data show.

“This time stronger yen worked to our advantage, but we aim to diversify our operations and build a company resistant to exchange rate fluctuations,” Nagamori said.

To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net; Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net

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