ABB Weighs Grid Sale While Seeking $4 Billion Acquisitions

  • `We have a clear transformation agenda for this company'
  • Overhaul comes amid shareholder pressure to boost profits

ABB Ltd. may sell its power-grids business and consider acquisitions in excess of $4 billion as the Swiss industrial giant reorganizes its operations.

The world’s largest power-grids supplier is looking for targeted purchases as it reassesses a product lineup spanning electric vehicle charging stations, factory robots and high-voltage generators, Chief Executive Officer Ulrich Spiesshofer said.

“We are ready to reengage in meaningful M&A,” Spiesshofer, 51, said Friday in an interview in New York. “We have added to the portfolio, but we have also parted ways with the portfolio. This is the way it will continue. We are really shaping ABB in a leaner, more agile way.”

ABB’s strategic review, including a possible divestiture of the grids division, comes amid shareholder pressure to boost profitability. Since becoming CEO in 2013, Spiesshofer has focused on reducing costs, improving margins and increasing global sales hampered by economic headwinds and a decline in the oil and gas market. This year, he returned the money-losing power systems unit to the black.

Cevian Stake

Activist investor Cevian Capital AB recently built a 5.2 percent stake in ABB, making it the second-biggest shareholder in the $42 billion company. Spiesshofer said the firm hasn’t made any specific requests regarding operations or overhaul strategy.

ABB shares fell 3.3 percent to 17.51 Swiss francs Friday in Zurich, dragging the stock’s decline to 17 percent this year. The company, formed in 1988 through the merger of Switzerland’s Brown Boveri & Cie and Sweden’s ASEA, has underperformed U.S. peers in 2015 including Rockwell Automation Inc., Honeywell International Inc. and General Electric Co.

ABB is looking to cut an additional $1 billion in costs in part by boosting productivity of white-collar workers, which make up a majority of the company’s 140,000 employees, Spiesshofer said.

ABB also said last week it would combine its utilities operations, spanning high-voltage power lines, substations and transformers, into a new power-grids division, cutting business lines to four from five. The Zurich-based company is now considering “all options” for the future of the unit, Spiesshofer said.

“We’re looking at the technology, we’re looking at the business model, we’re looking at the end markets, we’re looking at the value chain and we’re looking at the ownership structure,” he said. The options “could be that we keep it, it could be that we put it in a joint venture, it could be it parts ways with ABB.”

The company has made about two dozen acquisitions in the past five years, including its two largest: the $4.2 billion Baldor Electric Co. and $3.9 billion Thomas & Betts Corp. deals. After putting a hold on larger purchases last year, Spiesshofer said he would now be comfortable with a deal as large as Baldor and may consider bigger targets. The company could expand in markets including home automation or low- and medium-voltage electrification products, he said.

“We have a clear transformation agenda for this company,” Spiesshofer said. “The team is ready, the balance sheet is ready.”

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