ABB has announced that it will buy GE’s Industrial Solutions business for $2.6 billion. This represents GE’s latest move in refocusing on its central business. GE Industrial Solutions produces products including circuit breakers, switchgear, components for lighting control, and power supply equipment for facilities including data centres.
Regulators still need to approve the deal, which is expected to close in the first half of 2018.
ABB plans to use the deal to broaden its electrification business globally, especially in North America. Ulrich Spiesshofer, Chief Executive for ABB, said: “With GE Industrial Solutions, we strengthen our Number 2 position in electrification globally, and expand our access to the attractive North American market. This transaction creates significant value for our shareholders.”
GE Industrial Solutions had a revenue of $2.7 billion last year, and employs about 13,500 people worldwide. It will be integrated into ABB’s Electrification Products division, and ABB expects to retain the management team. ABB said that it expected to make about $200 million in annual savings within five years after the transaction, and has agreed to a long-term supply relationship with GE.
ABB expects integration costs of $400 million. The company also said that, as a result of this purchase, it had decided to delay a plan to buy back up to $3 billion in shares.
GE Industrial Solutions had operating earnings before interest, taxes, and amortisation (EBITA) of 6 per cent of sales, less than half of the 15 per cent operating margin at ABB’s Electrification Products division.