Dec 18, 2018
Hitachi has finalized a deal with industrial giant ABB to purchase 80% of their Power Grids division for $6.4bn. The move marks a transition for Hitachi, which will look to expand its energy solutions offerings by combining ABB’s power grids business with their digital technology division.
ABB will retain 19.9% in the deal, which values the business at $11bn.
With the deal ABB will look to restructure to boost their overall performance after losing 25% in share prices over the past year. While for Hitachi, the move will increase their ability to compete with global industry leaders like General Electric and Siemens.
Hitachi acquires 100 manufacturing sites, 200 sales sites and 36,000 employees.
Cevian Capital, a 5% stakeholder in the power grids business, attempted to purchase Power Grids in 2016, at which time ABB sought to turn around the business internally.
ABB said the divestment to Hitachi expands on an existing partnership and will turn Power Grids into a global infrastructure leader “with enhanced access to markets and financing.”
“Hitachi will combine ABB’s strength in the power grids business with our digital technology to build an energy platform that contributes to innovation the energy business,” said Hitachi President and CEO Toshiaki Higashihara, adding, “This creates further innovation for business fields such as life and industry and helps us address society’s issues and improve quality of life.”
ABB will also return 100% of the net profits, estimated a $7.6-7.8bn to its share holders through share buybacks, or a similar method. The deal is expected to close by the first half of 2020.
ABB reduces annual run-rate costs by $500m as a result of the deal.
“ABB has been driving industrial change for more than a century as a global pioneering technology leader. As a result of our Next Level strategy, all of our businesses are today number 1 or 2 in their respective markets. To support our customers in a world of unprecedented technological change and digitalization, we must focus, simplify and shape our business for leadership. Today’s actions will create a new ABB, a leader focused in digital industries,” said ABB CEO, Ulrich Spiesshofer.
ABB will simplify its organizational structure to facilitate its four leading businesses, focusing responsibilities and increasing efficiencies.
The four business are: Electrification, Industrial Automation, Robotics & Discrete Automation and Motion. Each business will be top global leaders in their respective market. ABB’s established domain know-how, world-class engineering and technology expertise, will position the four businesses well to deliver innovative products and solutions for enhanced customer value. ABB’s addressable market is growing by 3.5-4 percent per annum, adding $140 billion in size to reach $550 billion by 2025.
“Today’s announcement marks the beginning of a new chapter in ABB’s history. Building on our technology and global talented employee base we will further strengthen our focus in digital industries,” said ABB Chairman, Peter Voser.