Swiss company ABB Ltd has agreed to acquire the General Electric Co. industrial solutions business for a price of $2.6 billion helping to strengthen its business within the USA, which is its biggest market.
GE Industrial Solutions had revenue of $2.7 billion a year ago and employs about 13,500 people worldwide.
GE Industrial Solutions had $2.7 billion in revenue past year selling a wide range of systems used by electric utilities like circuit breakers, meters and transformers.
Zurich-based ABB said it expects the deal to deliver $200 million of annual cost synergies within five years. GE Industrial Solutions has deep customer relationships in more than 100 countries and an established installed base with strong roots in North America, ABB's biggest market. GE began accepting bids in December for its industrial solutions unit.
Since 2010, ABB has funneled around $11 billion in capital into its USA operations, and the GE deal would bolster the Swiss company's footprint in North America. Proceeds from its sale of its division of electrical products would be used for funding company restructuring said Flannery.
The deal, announced today, will see ABB pay US$2.6 billion (£1.92 billion) for the division and immediately form a long-term "strategic supply relationship" with GE for products that GE sources from the two companies. GE Industrial Solutions is headquartered in Atlanta, Georgia, and has about 13,500 employees around the world. "ABB values our people, domain expertise, and our ability to operate in the segments where we have depth and experience".
Once the deal completes, GE Industrial Solutions will be integrated into ABB's Electrification Product division.
After closing - expected in the first half of 2018 - the transaction will have an initial dampening effect on EP's operational EBITA margin, but ABB is committed to returning EP to its target margin of 15-19% during 2020. "GE will also benefit through an expanded strategic supply relationship with ABB as the two companies work together".
The CEO's latest deal increases the offering of ABB of critical transformers, power as well as related services for clients such as data centers, refineries and hospitals.