ZURICH (Dow Jones)--Switzerland's ABB Ltd (ABBN.VX) Monday said it has agreed to pay $3.9 billion in cash for Thomas & Betts Corp. (TNM) to increase its exposure to the U.S. low-voltage electrical equipment market.

The power and technology group said it is paying $72 a share for Thomas & Betts, a major North American supplier of power transmission lines and electrical conduits, as well as heating and ventilation products.

The acquisition price represents a 24% premium to Thomas & Bett's closing share price on Jan. 27 and a 35% premium to its average stock price over the past 60 trading days, ABB said.

The Swiss company said it expects to extract cost savings and revenue gains worth $200 million a year by 2016, with most of the cost synergies expected to come from more efficient sourcing and purchasing. ABB has secured $4 billion in bridge financing from Bank of America Merrill Lynch to fund the deal which it will repay with existing cash and new debt.

The merger transaction requires the approval of Thomas & Betts shareholders as well as relevant regulatory authorities. ABB expects it will close mid-year.

ABB Chief Executive Joe Hogan said the acquisition, ABB's biggest since it bought electric motor maker Baldor Electric Co for about $4.2 billion in 2010, gives the company "a great position in a growing U.S. economy and balances our portfolio better across the three geographic regions, Asia, Europe and the Americas too."

Analysts said the transaction made strategic sense for ABB but some were concerned about the price.

"The price certainly isn't cheap, but the news is fundamentally positive for the stock, as they will have access to loads of new sales channels in the U.S," said analyst Richard Frei, at Zuercher Kantonalbank.

ABB shares fell as some analysts considered the purchase price somewhat expensive.

At 0850 GMT, ABB was down CHF0.27, or 1.4%, at CHF19.16, while the broader Swiss market was down 0.7%.

Low voltage products is the smallest of ABB's four divisions, with sales $1.36 billion in the third quarter of 2011, but the most profitable with an operating margin of 19.9% in the third quarter of 2011.

ABB, which is based in Zurich, said in October the division was facing softening demand, with slower demand in developed markets and lower investment in renewables.

Hogan said the intention was not to counterbalance slowing demand elsewhere, but improve access to the U.S. market which he estimated was growing at 2.5% to 4%. In contrast the company expects Europe to grow by 1% to 2% and Asia by 5% to 7%.

Thomas & Betts is estimated to report 2011 revenues of $2.3 billion, and operating profit of $390 million. ABB's low voltage business in the U.S. had sales of $240 million in 2010.

Thomas & Betts, which is based in Memphis, Tennessee, was also attractive because of its distribution channels in the U.S. The company has a network of 6,000 distributors across the U.S. which will allow ABB to double its addressable market to approximately $24 billion.

"In the U.S. low voltage business it wasn't always the best products that won orders, but distribution channels were the most important," Hogan said.

Around 40% of Thomas & Betts sales were in the construction market, with most of it in the commercial property sector which had weathered the U.S. downturn better than residential, Hogan added.

In November, ABB said it was targeting sales growth of 7% to 10% each year over the next five years, a figure which could be increased by 3% to 4% by merger and acquisition activity.

The company could spend $9 billion to $18 billion between 2011 and 2015, in order to add $5 billion to $10 billion in acquired sales growth.

Hogan said there was potential for futher deals, but said nothing was imminent.

-By John Revill, Dow Jones Newswires; +41 43 443 8042; john.revill@dowjones.com

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