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Published: Tue, September 26, 2017
Economy | By Melissa Porter

ABB Increases Business in USA with Acquisition of GE Industrial Solutions

ABB Increases Business in USA with Acquisition of GE Industrial Solutions

The engineering company agreed Monday to buy General Electrics' industrial solutions unit for $2.6 billion dollars (€2.1 billion) in a move to boost its business in the United States.

GE Industrial Solutions had revenue of $2.7 billion previous year and employs about 13,500 people worldwide.

The industrial unit makes products like power supply equipment, lighting components, switches, and more.

ABB stated it expects the combined operations to reap $200 million in savings annually without detailing any impact on GE workers. GE started a bidding process for industrial solutions in December. Its existing management team will be retained and ABB has pledged to "build upon" its existing sales force.

Since 2010, ABB has funneled around $11 billion in capital into its US operations, and the GE deal would bolster the Swiss company's footprint in North America.

Chief Executive Officer Ulrich Spiesshofer has made digital solutions and services a cornerstone of his growth strategy and his latest deal will bolster its offering of critical power, transformers and related services for customers such as hospitals, data centers and refineries.

ABB disclosed the acquisition price as $2.6 billion, or about 1x 2016 revenues and an operational EBITDA margin of about 8%.

This combination brings together two global businesses with a broad complement of electrical protection and distribution assets. "ABB values our people, domain expertise, and our ability to operate in the segments where we have depth and experience".

A GE Industrial Solutions advanced manufacturing lab, opened in November 2014 in Plainville, Conn. As part of the transaction and overall value creation, ABB and GE have agreed to establish a long-term, strategic supply relationship for GE Industrial Solutions products and ABB products that GE sources today.

While the sale of the industrial solutions business was first mentioned while former CEO Jeff Immelt was in the corner office, Flannery gets credit for the deal as he puts together his plan to get the GE ship back on a profitable course. "GE will also benefit through an expanded strategic supply relationship with ABB as the two companies work together".

The transaction is scheduled to close in 1H 2018, and ABB will add GE Industrial's 13,000 employees in over 100 countries.

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