ABB to acquire GE Industrial Solutions for US$2.6bn

ABB has announced that it will acquire GE Industrial Solutions, GE’s global electrification solutions business.

GE Industrial Solutions has deep customer relationships in more than 100 countries and an established installed base with strong roots in North America, ABB’s biggest market. GE Industrial Solutions is headquartered in Atlanta, Georgia, and has about 13,500 employees around the world.

ABB will incur costs of $400 million over five years to integrate GE’s industrial solutions unit, CEO Ulrich Spiesshofer told journalists on Monday, adding that he’s prepared to offer support and ‘oxygen’ to reverse waning market share and years of under-investment at the business.

“It was a non-core business, and what happens with unloved children is they might not get the right level of attention to be nurtured or get going,” Spiesshofer said. “We know what needs to be fixed but we are very confident this business will prosper as part of ABB.”

ABB will acquire GE Industrial Solutions for US$2.6 billion and ABB expects to realise approximately $200 million of annual cost synergies in year five, which will be key in bringing GE Industrial Solutions to peer performance. 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.

“With GE Industrial Solutions, we strengthen our Number 2 position in electrification globally and expand our access to the attractive North American market,” said Spiesshofer. “Combined with the long-term strategic supply relationship with GE, this transaction creates significant value for our shareholders.”

He added: “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 centre 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.”

“This combination brings together two global businesses with a broad complement of electrical protection and distribution assets,” said John Flannery, CEO of GE. “ABB values our people, domain expertise and our ability to operate in the segments where we have depth and experience. GE will also benefit through an expanded strategic supply relationship with ABB as the two companies work together.”

GE Industrial Solutions will be integrated into ABB’s Electrification Products (EP) division, resulting in a unique global portfolio and very comprehensive offering for North American and global customers. They will benefit from ABB’s technologies and the ABB Ability digital offering coupled with GE Industrial Solutions’ complementary solutions and market access. Included in the acquisition is a long-term right to use the GE brand. ABB will retain the GE Industrial Solutions management team and build on its experienced sales force.

Tarak Mehta, president of ABB’s EP division, said: “This acquisition strengthens our position as partner of choice for electrification globally and in North America. We look forward to working with GE Industrial Solutions’ and ABB’s customers and channel partners to create new opportunities in this highly attractive core market for our division. We have a clear integration plan to realise the synergies of this combination and to bring our combined business back into the target margin corridor during 2020.”

ABB’s EP division delivers more than 1.5 million products to customers around the world every day through a global network of channel partners and end customers. EP offers a comprehensive portfolio of low- and medium-voltage products and solutions for a smarter, more reliable flow of electricity from substation to socket.

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