Swiss electrical equipment manufacturer ABB has agreed to acquire GE’s Industrial Solutions in a deal worth $2.6bn.
With the acquisition, ABB is expected to consolidate its second position in the global electrification market.
Atlanta-based GE Industrial Solutions has a presence in more than 100 countries. The company employs about 13,500 people around the world.
GE Industrial Solutions is claimed to have earned a revenue of $2.7bn last year, with an earnings before interest, taxes, depreciation and amoritisation (EBITDA) of 8% and an operational EBITDA of 6%.
With the transaction, ABB will realise $200m in annual cost synergies in five years from now. As part of the deal, GE and ABB have also agreed to establish a long term, strategic supply relationship for GE Industrial Solutions’ products and ABB’s products that GE sources today.
ABB CEO Ulrich Spiesshofer said: “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.”
ABB will combine GE Industrial Solutions in its Electrification Products division and this is claimed to form a unique global portfolio with a comprehensive offering for North American as well as global customers. The deal also includes a long term use of GE brand. ABB says that it will retain the GE Industrial Solutions’ management.
GE CEO John Flannery said: “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.”
Earlier, ABB acquired KeyMile Group’s communications and networks business to strengthen its digital grid portfolio and software focus. The acquisition is expected to support ABB Ability’s mission critical power grid applications.