ABB buys GE’s industrial division for $2.6bn
GE Industrial Solutions is based in Atlanta, Georgia, and has about 13,500 employees around the world with revenues of approximately $2.7 billion in 2016. It does not include the embedded boards division or GE Fanuc joint venture.
GE Industrial Solutions will be integrated into ABB’s Electrification Products (EP) division when the deal closes in the first half of 2018. This will allow the compbination of GE Industrial Solutions’ board and power products and US market access with ABB’s Ability digital offering. ABB will retain the GE Industrial Solutions brand and management team and build upon its experienced sales force. The two companies also has a sourcing agreement.
“This acquisition strengthens our position as partner of choice for electrification globally and in North America,” said Tarak Mehta, President of ABB’s EP division. “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.” ABB is aiming to bring the GE division’s margins of 8 per cent up to the company average of 15 per cent.
ABB expects to gain approximately $200 m of annual cost savings by year five, which it says will be key in bringing GE Industrial Solutions to peer performance. 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.
“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. “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.”
“This combination brings together two global businesses with a broad complement of electrical protection and distribution assets,” said John Flannery, the new CEO of GE who took over in August. “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.”ABB’s EP division delivers more than 1.5 million products to customers around the world every day through a global network of channel partners and end-customers. EP offers a comprehensive portfolio of low- and medium-voltage products and solutions for a smarter, more reliable flow of electricity from substation to socket.”
Schneider Electric in France had also been interested in the division, but instead bought automatic transfer switch maker Asco Power Technologies from Vertiv, the former network power business of Emerson Electric, for $1.25bn.
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