Economy

Credit Suisse takes ABB to the United States with GE deal

Credit Suisse takes ABB to the United States with GE deal”

Power grids maker ABB is buying General Electric's Industrial Solutions business for $2.6 billion on a bet that it can improve lacklustre margins at the unit over the next five years, the Swiss engineering company said on Monday.

GE Industrial Solutions had revenue of $2.7 billion previous year and employs about 13,500 people worldwide. GE shares closed Friday at $24.87 and are indicated 0.1% higher in premarket trading.

ABB spoke up the potential for GE Industrial Solutions to expand its access to North America through an "established installed base", "strong roots" and "deep customer relationships".

"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".

Atlanta, Georgia-based GE Industrial Solutions makes circuit breaks, switchboard panels and other electrical grid hardware used by industry and residential clients. The company employs about 13,500 people around the world.

The transaction is expected to be operationally accretive in year one and to help ABB realise some United States dollars 200 million in annual cost synergies in year five, it said. The business recorded an operational earnings, before interest, tax, depreciation and amortisation (EBITDA) margin of 8% and an operational EBITA margin of about 6% in 2016, when its revenues reached Dollars 2.7 billion.

The purchase adds to the more than 470 acquisitions already agreed by European buyers for USA businesses so far this year - the busiest year-to-date for such deals since 2008, according to analysis of data from Dealogic.



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