© abb Electronics Production | December 17, 2018
It’s confirmed – ABB sells Power Grids to Hitachi
The papers are signed and the whispering is finally all done; Hitachi will acquire ABB’s Power Grids business, an expansion of its existing partnership with Hitachi.
The agreed price represents a transaction Enterprise Value of $11 billion for 100% of Power Grids, the equivalent to an EV/op. Hitachi says it will accelerate Power Grids to the next stage of its development, building on the foundation achieved under ABB’s previous ownership. “ABB has been driving industrial change for more than a century as a global pioneering technology leader. As a result of our Next Level strategy, all of our businesses are today number 1 or 2 in their respective markets. To support our customers in a world of unprecedented technological change and digitalization, we must focus, simplify and shape our business for leadership. Today’s actions will create a new ABB, a leader focused in digital industries,” says ABB CEO, Ulrich Spiesshofer, in a press release. “With this transaction, we are realizing the value we have built through the transformation of Power Grids over the last four years. Our shareholders will directly benefit through the return of the proceeds of the divestment. Building on our existing partnership announced in 2014, the initial joint venture will provide continuity for customers and our global team,” Spiesshofer adds. ABB will initially retain a 19.9% equity stake in the joint venture, allowing a seamless transition. The transaction agreement includes a pre-defined option for ABB to exit the retained 19.9% share, exercisable three years after closing, at fair market value with floor price at 90% of agreed Enterprise Value. Hitachi holds a call option over the remaining 19.9% share at fair market value with floor price at 100% of agreed Enterprise Value. The joint venture will be headquartered in Switzerland, with Hitachi retaining the management team to ensure business continuity. Starting in Q4 2018 until closing, ABB will report Power Grids in discontinued operations. As a consequence, ABB will record USD 350-400 million of stranded and other carve-out related costs, which are currently predominately recorded as part of the Power Grids cost base. The completion of the transaction is expected by first half of 2020, subject to regulatory approvals and fulfillment of closing conditions.