ABB has agreed to sell 80.1% stake in its Power Grids unit to Japanese conglomerate Hitachi for about $6.4bn, excluding debt.
Hitachi has been given an option to acquire the remaining 19.9% stake in Power Grids, which can be exercised three years after closing of the original deal. The transaction is expected to take place in the first half of 2020. The deal values 100% of the Power Grids business at $11bn.
The ABB unit caters to utility, industry, infrastructure and transportation customers. It is is focused on addressing important areas like the integration of renewable energies, increasing network complexity, grid automation, and microgrids.
The Power Grids business operates four segments, which includes Grid Automation, Grid Integration, High Voltage Products and Transformers. Hitachi hopes the acquisition will enable it to offer innovative energy solutions across the world by combining the ABB’s grid solutions with its digital technology.
Hitachi president and CEO Toshiaki Higashihara said: “Hitachi will combine ABB’s strengths in the power grids business with our digital technology to build an energy platform that contributes to innovating the energy business.
“This creates further innovation for business fields such as life and industry and helps us address society’s issues and improve quality of life.”
ABB said that Hitachi is the best owner for the divested business as the latter will consolidate it further and provide access to new and emerging markets along with financing.
The Switzerland-based automation company expects the transaction to help in the simplification of its business model and structure. It plans to return 100% of the $7.6-7.8bn estimated net cash proceeds from the 80.1% sale to its shareholders via share buyback or similar mechanism.
ABB CEO Ulrich Spiesshofer said: “ABB has been driving industrial change for more than a century as a global pioneering technology leader. As a result of our Next Level strategy, all of our businesses are today number 1 or 2 in their respective markets.
“To support our customers in a world of unprecedented technological change and digitalization, we must focus, simplify and shape our business for leadership. Today’s actions will create a new ABB, a leader focused in digital industries.”