ABB and alstom are to merge their power generation businesses, it was announced on 23 March. Subject to approvals, the companies said they would combine their businesses in a 50:50 joint company, to be known as ABB Alstom Power. The new company will be headquartered in Brussels, under president and CEO Claude Darmon, who was previously deputy CEO of Alstom. It will have a management board with 2-3 other members, and a supervisory board, with three members designated by Alstom and three by ABB, under the chairmanship of ABB president Göran Lindahl.
Included in ABB Alstom Power are all of ABB’s Power Generation segment, except its nuclear activities and its business in service and financing distributed power. Alstom is contributing all its energy sector activities except the General Electric-based heavy duty gas turbines, which will be divested to GE.
The new company will create the world’s largest supplier of power generation equipment, employing some 54,000 people in 100 countries. ABB’s and Alstom’s revenues in the business totalled US$11B in 1998, US$8B from ABB and US$3B from Alstom. To make up for the difference in the size of the two businesses Alstom will provide ABB with cash compensation of US$1.5B.
According to ABB, the joint company will be better able to respond to privatisation and deregulation and the growing market for power generation equipment, because of the two companies’ complementary product ranges, geographic scope and R&D capabilities. Within 3-4 years, improvements in efficiency and productivity, and economies of scale, are expected to save the new company some US$450M annually.
Speaking about the merger, Lindahl said: ‘To be a successful leading player in this demanding and dynamic market you need a comprehensive range of products and solutions, a commitment to technological renewal and global presence.’ Pierre Bilger, chairman and CEO of Alstom, added: ‘Technological breakthrough is key to anticipate customer demands and ensure long term profitable growth. The joint company will be a strong R&D powerhouse.’