ABB Casts Eye Over Potential Acquisitions to Boost Robotics

ABB Ltd. (ABBN), the world’s largest power- grid maker, said it may pursue acquisitions to expand its business supplying robots for assembly lines as the Swiss company is “very confident” about long-term demand for automation.

ABB is already casting an eye over potential targets, Ulrich Spiesshofer, head of ABB’s Discrete Automation and Motion unit, said in an interview today. He declined to elaborate, or comment on reports linking ABB to Elster Group (ELT) or Invensys Plc. (ISYS)

“In discrete automation, we have a very strong pillar in our portfolio on the robotics side,” Spiesshofer said. “We see opportunities in that space to grow more both inorganically and organically.”

Chief Executive Officer Joe Hogan is channeling more funds into automation as ABB’s power and low-voltage units battle pricing issues and low demand in China and southern Europe. ABB may spend a maximum $10 billion between now and 2015 on takeovers, Chief Financial Officer Michael Demare said May 11.

Attractive areas for growth include programmable logic controllers as well as motion- and sensor-controls. ABB bolstered its motors offering with the acquisition of Baldor Electric Co. in 2011, Spiesshofer said.

Rising energy costs and efforts to improve power efficiency in countries like the U.S., Australia and Germany, as well as state-backed efforts to improve efficiency in China are driving demand at the automation and motion unit, which manufacturers factory robots and drives for BMW AG and Royal Dutch Shell Plc. (RDSA)

Targets Set

The automation and motion unit’s earnings before interest and taxes have jumped to $1.3 billion in 2011 from $574 million in 2009, boosted by profit from the purchase of Baldor Electric Co. and a return to profitability in robotics in 2010 after a bout of restructuring. The division reported the best profitability of all ABB’s units in the first quarter of 2012, and accounted for 21 percent of group revenue last year.

Spiesshofer, who has been tasked with growing organic revenue at 12 to 15 percent per year between now and 2015, declined to comment on this year’s progress toward that target. Organic revenue grew 9 percent from a year earlier in the first quarter.

“Long-term, I am confident that we can deliver what we promised to our shareholders and customers,” he said.

European customers are “naturally careful about making decisions” as a result of the economic environment, the ABB executive said. Revenue is split equally between Europe, the U.S. and Asia after the acquisition of Baldor, and continues to grow across all areas, he said.

The integration of Baldor, which ABB purchased for $4.1 billion last year, is “fully on track” and the motor-maker’s growth is “in line with the division overall,” Spiesshofer said.

To contact the reporter on this story: Patrick Winters in Zurich at pwinters3@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net