THE long-planned acquisition of Swiss engineering group ABB's power grids division by Hitachi has finally closed. The transaction involves Hitachi acquiring an 80.1% stake in the new power grids unit, with the price tag valuing the company at US$11 billion.
The newly named Hitachi ABB Power Grids, though controlled by Hitachi, will operate as a joint venture with its headquarters remaining in Switzerland. The company has 36,000 employees, operations in 90 countries, and annual revenues of around US$10 billion.
ABB has the option to dispose of its 19.9% stake after three years at fair market value - though with a floor price set at 90% of the US$11 billion enterprise value figure. Hitachi has previously said that it would like to make the company a wholly-owned subsidiary three years after closing.
The deal was originally announced in December 2018, but the process of ABB spinning off its power grids division, plus obtaining clearances relating to competition laws, meant that the timeline was originally set out to take around eighteen months.
The ABB Power Grids business engages in providing systems, software, products, and service solutions. The offerings are mainly used by the company’s infrastructure, industry, utility, and transport customers. The business is spread across Africa, the Americas, Asia, Europe, and the Middle East.
The deal offers Hitachi access to new markets, and will help with the global expansion of its power grid industry activities. A presentation to investors by Hitachi says that the acquisition will help secure a global customer base and build an energy platform to realize the energy solutions business which Hitachi aims to expand.
It plans to leverage the global customer base of ABB’s power grids business across Hitachi’s all business areas beyond the energy solutions business, and build an energy platform by combining global No.1 power grids business with Hitachi’s digital technology.
The two companies had already been cooperating since 2015 via the Hitachi ABB HVDC Technologies partnership.
ABB businesses include grid automation software, grid integration via substations and HVDC, high voltage products and transformers.
ABB is listed on the Swiss Stock Exchange, while Hitachi is listed on the Tokyo Stock Exchange. ABB is receiving around US$7.7 billion in cash from the deal, and plans to use US$4 billion of this to buy back up to 10% of its stock.