ABB Sells Power Grid Business

Hitachi and ABB announced they have reached a $6.4 billion deal for ABB to sell its power grid business to Hitachi. The move will make Hitachi the second largest heavy electrical equipment maker by revenue, behind only GE.  It will also allow ABB to focus on other areas like automation and industrial robots.

ABB’s power grid division is valued at $11 billion, which is about half of its value from just two years ago. Hitachi will buy 80.1 percent of the business, and ABB will hold onto the remaining 20% and return about $7.8 billion to investors through mostly buybacks.

Toshiaki Higashihara, president and CEO of Hitachi, believes this is a smart move for Hitachi. “We will be able to acquire the world’s No. 1 power grid business. With the acquisition, Hitachi will show its further evolution as a global enterprise,” Higashihara told reporters.

“With this transaction, we are realizing the value we have built through the transformation of Power Grids over the last four years,” ABB CEO Ulrich Spiesshofer said in a press release. “To compete in today’s fast-changing world, we fully empower our businesses, through the discontinuation of the legacy matrix structure ensuring zero-distance to customers and increasing our agility in decision-making. Our four newly shaped businesses, each a global leader, will be well aligned to the way our customers operate and focus stronger on emerging technologies such as artificial intelligence. The continued simplification of our business model and structure will be a catalyst for growth and efficiency in our businesses. Our businesses will be further supported through the transfer of experienced resources from today’s country organizations,” Spiesshofer added.

“All of this will only be possible due to the commitment of our global team who has made ABB what it is today. Our innovation power together with our inclusive culture will continue to be a differentiating strength of our company. We will live enhanced customer focus, provide attractive opportunities for our employees and deliver value for shareholders,” Spiesshofer concluded.

ABB did add that it will be disclosing more about its organizational structure during its next earnings report in February. Spiesshofer said that no major job cuts are expected as a result of the deal.