ABB to acquire GE Industrial Solutions for US$2.6 B
ABB has announced the acquisition of GE Industrial Solutions, GE’s global electrification solutions business. ABB would close the deal for US$2.6 billion; the transaction will be operationally accretive in year one. ABB expects to realize approximately US$200 million of annual cost synergies in 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 ABB products that GE sources today.
GE Industrial Solutions has deep customer relationships in more than 100 countries and an established installed base with strong roots in North America, ABB’s biggest market. GE Industrial Solutions is headquartered in Atlanta, Georgia, and has about 13,500 employees around the world. In 2016, the firm had revenues of approximately US$2.7 billion, with an operational EBITDA margin of approximately 8% and an operational EBITA margin of approximately 6%.
GE Industrial Solutions will be integrated into ABB’s Electrification Products (EP) division, resulting in a global portfolio and comprehensive offering for North American and global customers. They will benefit from ABB’s innovative technologies and the ABB AbilityTMdigital offering coupled with GE Industrial Solutions’ complementary solutions and market access. Included in the acquisition is a long-term right to use the GE brand. ABB will retain the GE Industrial Solutions management team and build upon its experienced sales force.
After closing, this transaction will have an initial dampening effect to EP’s operational EBITA margin. ABB commits to returning EP to its target margin corridor of 15-19 percent during 2020.
The transaction is expected to close in H1 2018, subject to customary regulatory clearances. Credit Suisse and Dyal Co. acted as financial advisors to ABB, and Davis Polk & Wardwell provided legal counsel.
ABB CEO Ulrich Spiesshofer stated:
“With GE Industrial Solutions, we strengthen our Number 2 position in electrification globally and expand our access to the attractive North American market. Combined with the long-term strategic supply relationship with GE, this transaction creates significant value for our shareholders.”
“Together with the GE Industrial Solutions team, we will execute our well-established plans in a disciplined way to bring this business as part of the global ABB family back to peer performance. With this next step of active portfolio management, we continue to shift ABB’s center of gravity, in line with our Next Level strategy, by strengthening competitiveness, mainly in the North American market, and lowering risk with an early-cycle business.”
John Flannery, CEO of GE, commented:
“This combination brings together two global businesses with a broad complement of electrical protection and distribution assets. 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.”
Tarak Mehta, President of ABB’s EP division, said:
“This acquisition strengthens our position as partner of choice for electrification globally and in North America. We look forward to working with GE Industrial Solutions’ and ABB’s customers and channel partners to create new opportunities in this highly attractive core market for our division. We have a clear integration plan to realize the synergies of this combination and to bring our combined business back into the target margin corridor during 2020.”
During the last week, we have reported about several corporate transaction globally:
- Sunseap Group sells a 25.7% stake to Banpu PCL - Singapore
- Mercuria Energy Group sells Danskammer Energy to Tiger Infrastructure - USA
- GFG Alliance acquires a majority stake in ZEN Energy - Australia
- Eren Renewable Energy sells a 23% stake to Total - France
- Brookfield purchases 16% stake in Renova from Light S.A. - Brazil
- Shell acquires MP2 Energy - USA
