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ABB To Buy GE Industrial Solutions For $2.6 Bln

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Swiss engineering firm ABB Ltd.(ANN.L,ABB) announced Monday its agreement to acquire GE Industrial Solutions, the electrification solutions business of Conglomerate General Electric Co (GE), for $2.6 billion. The acquisition includes a long-term right to use the GE brand. ABB expects the acquisition to strengthen its Number 2 position in electrification globally and expand access to North America, ABB's biggest market.

The transaction is expected to be operationally accretive in year one. ABB expects to realize 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 deal 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 currently.

The transaction is expected to close in the first half of 2018, subject to customary regulatory clearances.

Bloomberg reported in the weekend, citing people with knowledge of the matter, that GE was nearing deal to sell its industrial solutions unit to ABB in a deal valued at $2.5 billion to $3 billion. GE and ABB were said to be finalizing contractual agreements for the supply and services of future equipment.

Atlanta, Georgia-based GE Industrial Solutions has about 13,500 employees around the world. In 2016, the unit had revenues of approximately $2.7 billion, with an operational EBITDA margin of approximately 8 percent and an operational EBITA margin of approximately 6 percent.

Following the acquisition, GE Industrial Solutions will be integrated into ABB's Electrification Products or EP division. The North American and global customers will benefit from ABB's innovative technologies and the ABB Ability digital offering coupled with GE Industrial Solutions' complementary solutions and market access.

ABB will retain the GE Industrial Solutions management team and build upon its experienced sales force. After closing, this transaction will have an initial dampening effect to EP's operational EBITA margin. ABB commits to returning EP to its target margin corridor of 15-19 percent during 2020.

ABB CEO Ulrich Spiesshofer said, "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 center 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."

Given this transaction, ABB has decided to put the previously announced share buyback program on hold.

Credit Suisse and Dyal Co. acted as financial advisors to ABB, and Davis Polk & Wardwell provided legal counsel.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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