ABB, a global supplier of industrial technologies, has announced the acquisition of GE Industrial Solutions (GE IS) for US$2.6 billion, seeking to gain further foothold in the North American market and leverage GE IS’s existing portfolio to become a more influential player in the electrical and automation fields.
ABB, a global supplier of industrial technologies, has announced the acquisition of
GE Industrial Solutions (GE IS) for US$2.6 billion, seeking to gain further foothold in the North American market and leverage GE IS’s existing portfolio to become a more influential player in the electrical and automation fields.
According to ABB, GE IS will be integrated into ABB’s Electrification Products (EP) division under the deal, which is expected to close in the first half of 2018. ABB also sees the deal as a way to turn GE IS around. “In 2016, GE Industrial Solutions had revenues of approximately $2.7 billion, with an operational EBITDA margin of approximately 8 percent and an operational EBITA margin of approximately 6 percent. The transaction will be operationally accretive in year one. ABB expects to realize approximately $200 million of annual cost synergies in year five, which will be key in bringing GE Industrial Solutions to peer performance,” ABB said in the press release announcing the acquisition, adding that as part of the deal, the company has received long-term usage of the GE brand, and the two have agreed to establish a long-term, strategic supply relationship to buy each other’s products and solutions.
A major rationale for ABB’s acquisition of GE IS, based in Atlanta, Georgia, is to make further inroads into the North America market. According to a presentation provided by ABB, its shares in Asia/Middle East/Africa, Europe and Americas are 37 percent, 36 percent and 27 percent, respectively. Acquiring GE IS is a way for ABB to gain further access to the North American market through GE IS’s customer relationships, large installed base and extensive distribution networks.
“With GE Industrial Solutions, we strengthen our Number 2 position in electrification globally and expand our access to the attractive North American market,” said ABB CEO Ulrich Spiesshofer. “Combined with the long-term strategic supply relationship with GE, this transaction creates significant value for our shareholders.”
Meanwhile, ABB also seeks to build upon GE’s existing portfolio to further its influence in the electrification business. ABB is already strong in MV protection and control, installation products, solar inverters and EV charging in the U.S.; adding those to GE IS’s LV protection and control, building products and UPS technologies will enable ABB to offer a wider range of solutions.
This ultimately strengthens ABB’s position in the US market, where ABB’s portfolio also includes products and solutions related to power grids, robotics and motion and industrial automation, making it a stronger competitive force against competitors like Schneider Electric and Eaton.
“This acquisition strengthens our position as partner of choice for electrification globally and in North America. We look forward to working with GE Industrial Solutions’ and ABB’s customers and channel partners to create new opportunities in this highly attractive core market for our division,” said Tarak Mehta, President of ABB’s EP division. “We have a clear integration plan to realize the synergies of this combination and to bring our combined business back into the target margin corridor during 2020.”
“This combination brings together two global businesses with a broad complement of electrical protection and distribution assets,” said John Flannery, CEO of GE. “ABB values our people, domain expertise, and our ability to operate in the segments where we have depth and experience. GE will also benefit through an expanded strategic supply relationship with ABB as the two companies work together.”