Reuters: ABB In Talks To Sell Power Grids

Reuters: ABB In Talks To Sell Power Grids

Reuters News Agency is reporting ABB is negotiating with Hitachi Ltd and Mitsubishi Electric Corp to sell all or part of its power grids business.  The report cited unnamed sources, but added that ABB hopes to announce the sale by the end of next week. Reuters reports the sale could be worth around $11 billion.

This news comes at an interesting time for ABB.  Two years ago, tED magazine and reported Chief Executive Ulrich Spiesshofer decided to keep the power grids division, despite calls for many shareholders to sell. Then just last month, after ABB’s earnings report stated the power grids division reported “continued order momentum in the quarter, with total orders rising 11 percent (7 percent higher in US dollars) and third-party base orders increasing 13 percent (9 percent higher in US dollars), was supported by Power Up initiatives”, reported Spiesshofer was prepared to sell the power grids division.

ABB’s power grids division has the lowest profit margin of all of ABB’s business units, and Reuters reports the deal could become a joint venture, where ABB will keep some shareholding in the division and continue to sell components.  Reuters speculates the money from the joint venture could go back to shareholders, who would begin searching for acquisitions to enhance ABB’s automation business. A sale on the power grids side will also help ABB focus on its more profitable divisions.

ABB’s power grids has 36,000 employees, and total sales from last year reached  $10.4 billion. According to last month’s ABB earnings report, “the division delivered an operational EBITA margin of 10.0 percent, supported by cost reduction efforts and strong project execution.”

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