ABB is to acquire GE Industrial Solutions, GE’s global electrification technology business, for a consideration of $2.6 billion. The transaction is expected to close in H1 2018, subject to customary regulatory clearances.
The acquisition brings to ABB GE Industrial Solutions’ strong customer base in more than 100 countries and an established installed base with strong roots in North America, ABB’s biggest market. It is headquartered in Atlanta, Georgia, and has about 13 500 employees around the world. In 2016, it had revenues of approximately $2.7 billion, with an operational EBITDA margin of approximately 8 % and an operational EBITA margin of approximately 6 %.
ABB expects to realise approximately $200 million of annual cost synergies by year five. As part of the transaction and overall value creation, ABB and GE have agreed to establish a long-term, strategic supply relationship for GE Industrial Solutions products and those ABB products that GE sources today. Included in the acquisition is a long-term right to use the GE brand. Because of this transaction, ABB has decided to put its previously announced share buyback programme on hold.
“With GE Industrial Solutions, we strengthen our Number 2 position in electrification globally and expand our access to the attractive North American market,” said ABB CEO Ulrich Spiesshofer. “Combined with the long-term strategic supply relationship with GE, this transaction creates significant value for our shareholders.”
“This combination brings together two global businesses with a broad complement of electrical protection and distribution assets,” said John Flannery, CEO of GE. “ABB values our people, domain expertise, and our ability to operate in the segments where we have depth and experience. GE will also benefit through an expanded strategic supply relationship with ABB as the two companies work together.”
GE Industrial Solutions will be integrated into ABB’s Electrification Products (EP) division, resulting in what ABB says is a unique global portfolio and very comprehensive offering for North American and global customers.
ABB will retain the GE Industrial Solutions management team and sales force. After closing, this transaction will have an initial dampening effect on EP’s operational EBITA margin. ABB commits to returning EP to its target margin corridor of 15-19 % during 2020.
Tarak Mehta, president of ABB’s EP division, said: “We have a clear integration plan to realise the synergies of this combination and to bring our combined business back into the target margin corridor during 2020.”
