M&A alert. ABB to acquire GE Industrial Solutions for USD 2.6 bln

ABB today announced the acquisition of GE Industrial Solutions, GE’s global electrification solutions business for USD 2.6 billion. ABB expects to realize approximately USD 200 million of annual cost synergies in year five.

GE Industrial Solutions will be integrated into ABB’s Electrification Products (EP) division, resulting in a unique global portfolio and very comprehensive offering for North American and global customers. They will benefit from ABB’s innovative technologies and the ABB Ability TM digital 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.

Given this transaction, ABB has decided to put the previously announced share buyback program on hold. 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.

After closing, this transaction will have an initial dampening effect to EP’s operational EBITA margin.

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.”

GE Industrial Solutions has a 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, GE Industrial Solutions had revenues of approximately USD 2.7 billion, with an operational EBITDA margin of approximately 8 percent and an operational EBITA margin of approximately 6 percent.

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.

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