- Business is part of power-grid unit under strategic review
- Shareholder Cevian says supports sale, still wants break up
ABB Ltd., under pressure from Swedish activist shareholder Cevian Capital AB to spin off its power-grid division, said it will slim down the business by selling some operations to NKT Cables for an enterprise value of $934 million.
The sale of its high-voltage cable system to the Danish company also comes with a long-term supply agreement, Zurich-based ABB said in a statement on Wednesday. Progress on the strategic review of the power-grids business will be given Oct. 4, it said.
The sale of the cables operation is “sound and reasonable,” but ABB should still spin off the power-grid division, Cevian co-founder Christer Gardell said by e-mail. “The division should be separated and listed by distributing the shares to the owners of ABB.”
ABB has faced mounting pressure in recent weeks from Cevian to hive off the power-grid division as a way to create value for shareholders and grow the business. In the lead up to Chief Executive Officer Ulrich Spiesshofer unveiling the results of a year-long review of the division at next month’s investor day, Cevian urged that the unit be carved out and listed, saying ABB’s current structure is too complex and difficult to run.
Sending a Signal
The transaction is a means to simplify and focus of power grids, according to ABB. Spiesshofer has nevertheless left open the question of its future within the company. NKT is buying a cable business generating revenue of $524 million, compared with pro-forma sales for the power-grid division of $11.6 billion, according to figures provided by ABB.
As well as getting a “pretty good price” for the asset, the cables sale “might be a step towards a spin off,” Pareto Securities analyst Henrik Falk said. “The case is not closed for either a sale, a spin-off or keeping power grids.”
ABB shares rose 0.3 percent to 21.82 Swiss francs as of 10:21 a.m. in Zurich.
In a separate statement, NKT said it will split its holding into two listed entities following the purchase of ABB HV Cables. NKT’s own cable business has production units in Europe and China and had revenue of 1.2 billion euros ($1.3 billion) last year. The combination will make the business more competitive as well as allowing ABB access to cables supply.
The sale is a “landmark transformational deal for NKT Cables,” CEO Michael Hedegaard Lyng said in a phone interview. “We’re getting something that we don’t have today.”
The new combined business “will be strongly positioned in both the growing offshore wind industry as well as for the development of the interconnector grid in Europe,” NKT said. Integration will be helped by “a strong organisational fit rooted in a shared Nordic heritage and culture.”
(A previous version of this story was corrected to show NKT revenue.)