Global energy technology giant ABB has acquired GE’s Industrial Solutions arm in a multi-billion-dollar deal designed to strengthen its grip on the worldwide electrification market.
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.
ABB spoke up the potential for GE Industrial Solutions to expand its access to North America through an “established installed base”, “strong roots” and “deep customer relationships”.
Ulrich Spiesshofer, chief executive at ABB, said the move strengthened the firm’s number two position in the global electrification market and would create “significant value” for its 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,” he said.
ABB expects GE Industrial Solutions, which posted revenues of around $2.7 billion last year, to be operationally accretive in year one, while the company also expects to realise around $200 million (£147.8 million) worth of annual cost synergies within five years of transaction close.
Once the deal completes, GE Industrial Solutions will be integrated into ABB’s Electrification Product division. Its existing management team will be retained and ABB has pledged to “build upon” its existing sales force.
Subject to regulatory approval, ABB expects to complete the transaction within the first half of next year.