{"id":103439,"date":"2017-09-26T00:08:43","date_gmt":"2017-09-25T22:08:43","guid":{"rendered":"http:\/\/www.arabtelegraph.com\/?p=103439"},"modified":"2017-09-26T00:08:43","modified_gmt":"2017-09-25T22:08:43","slug":"103439","status":"publish","type":"post","link":"https:\/\/www.arabtelegraph.com\/?p=103439","title":{"rendered":""},"content":{"rendered":"
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ABB buys GE business for $2.6 billion<\/h1>\n

in bet it can boost margins<\/h1>\n<\/div>\n<\/div>\n
\n

\u00a0Power grids maker ABB is buying General Electric\u2019s Industrial Solutions business for $2.6 billion in a bet it can improve the division\u2019s lackluster margins over the next five years, the Swiss engineering company said on Monday.<\/strong><\/p>\n

Zurich-based ABB sees potential for annual cost benefits of $200 million with the deal, which includes an agreement for long-term use of GE\u2019s brand and a strategic partnership. In 2016, the GE business had sales of $2.7 billion.<\/p>\n

The GE products include circuit breakers, switchgear, components for lighting control and power supply equipment for facilities including data centers. ABB\u2019s portfolio includes similar products.<\/p>\n

ABB is seeking to better penetrate the North American market and gain access to GE\u2019s larger installed base of electrical installations worldwide.<\/p>\n

ABB said the business had been \u201can unloved child\u201d and pledged to upgrade aging products with its own technology to help arrest a declining U.S. market share.<\/p>\n

ABB is suspending its $3 billion share buyback program as part of the deal, which will bolster its position as the second-biggest supplier of electrical components behind France\u2019s Schneider Electric.<\/p>\n

ABB is also wagering on being able to cut costs and boost profitability at the Georgia-based GE unit.<\/p>\n

\u201cThe key rationale of the integration is, first we will make this business better. And then afterwards, we will make this business bigger and better,\u201d said ABB Chief Executive Ulrich Spiesshofer.<\/p>\n

ABB expects integration costs of $400 million.<\/p>\n

The GE unit\u2019s operating earnings before interest, taxes and amortization (EBITA) are just 6 percent of sales, less than half the 15 percent operating margin at ABB\u2019s comparable Electrification Products division.<\/p>\n

Spiesshofer said he agreed to the transaction only after striking a supply partnership where ABB and GE will increase buying and selling from each another.<\/p>\n

\u201cWithout that, the economics wouldn\u2019t have worked,\u201d he told reporters on a call. \u201cWith the supply partnership, the economics at the price of 0.9 times revenue is working.\u201d<\/p>\n

GE has been under pressure from activist investor Nelson Peltz\u2019s Trian Fund Management to sell assets and focus on higher-margin businesses.<\/p>\n

Some analysts said the price was surprisingly high given the GE business\u2019s low profitability.<\/p>\n

\u201cGE Industrial Solutions isn\u2019t in top shape, so ABB has its work cut out for it,\u201d said Zuercher Kantonalbank analyst Richard Frei.<\/p>\n

ABB said it would finance the deal — likely its last for some time — with cash and did not need to raise equity capital. Its shares were little changed in early trading.<\/p>\n

GE had resumed negotiations to sell the business to ABB after moderating its price expectations, people familiar with the matter told Reuters in August.<\/p>\n

Credit Suisse and Dyal Co acted as financial advisers to ABB, and Davis Polk & Wardwell provided legal counsel.<\/p>\n

\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

<\/div>\n","protected":false},"excerpt":{"rendered":"

ABB buys GE business for $2.6 billion in bet it can boost margins \u00a0Power grids maker ABB is buying General Electric\u2019s Industrial Solutions business for $2.6 billion in a bet it can improve the division\u2019s lackluster margins over the next five years, the Swiss engineering company said on Monday. Zurich-based ABB sees potential for annual …<\/p>\n","protected":false},"author":3,"featured_media":103454,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[36],"tags":[],"class_list":["post-103439","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-te-public"],"yoast_head":"\n- Arab Telegraph<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.arabtelegraph.com\/?p=103439\" \/>\n<meta property=\"og:locale\" content=\"ar_AR\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"- Arab Telegraph\" \/>\n<meta property=\"og:description\" content=\"ABB buys GE business for $2.6 billion in bet it can boost margins \u00a0Power grids maker ABB is buying General Electric\u2019s Industrial Solutions business for $2.6 billion in a bet it can improve the division\u2019s lackluster margins over the next five years, the Swiss engineering company said on Monday. 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