At least two investors filed lawsuits for investors of Baldor Electric Company (NYSE:BEZ) in State Court against Baldor Electric directors over alleged breaches of fiduciary duties arising out of their attempt to sell Baldor Electric too cheaply to Swizterland-based ABB.
According to the complaint the plaintiff to stop the proposed takeover of Baldor Electric Co by ABB under the current conditions. On Tuesday, Nov. 30, 2010 Baldor Electric Company (NYSE: BEZ) and ABB (NYSE: ABB), announced that they have agreed that ABB will acquire Baldor Electric Company in an all-cash transaction valued at approximately $4.2 billion, including $1.1 billion of net debt. Under the terms of the definitive agreement ABB will commence a tender offer to purchase all of Baldor Electric Company’s outstanding shares for $63.50 per share in cash. Baldor Electric Co said the transaction represents a 41 percent premium to Baldor’s closing stock price on Nov. 29, 2010.

Shares of Baldor Electric Company (BEZ) jumped in response to the announcement from $45 to $63.25 per share.

But the plaintiff says the $63.50 price undervalues Baldor Electric Company based on recent positive stock performance despite a downturn in the economy and does not reflect the future higher value of the company based on future projections. One plaintiff says that all indications are that Baldor's stock will continue to rise. For instance, analysts estimate that Baldor will experience earnings growth rate of over 117 percent in 2010, of over 40 percent in fiscal year 2011 and of over 25 percent in the subsequent five fiscal years . In fact Baldor Electric Company has performed well in the past for its shareholders. Baldor Electric’s 52week Total Revenue went from $811.28million in 2006 to $1,524million in 2009. Its Net Income went from $48.12million in 2006 to $59.80million in 2009. Baldor Electric Company reported for the first 39weeks in 2010 a combined Total Revenue of $1,290.68million with a Net Income of $63.5million.
Further the plaintiffs allege that the agreement between Baldor Electric Company and ABB includes deal protection provisions to deter alternative and possibly higher bids to purchase Baldor, such as a non-solicitation, a notification, a top-up option, and a termination fee provision.