ABB has acquired General Electric’s global electrification solutions business in a move that will only strengthen their position in the market as one of the leading automation companies. Ulrich Speisshofer, CEO, ABB said, “With GE industrial solutions, we strengthen our number 2 position in electrification globally and expand our access to the attractive North American market. Combined with the long-term strategic supply relationship with GE, this transaction creates significant value for our shareholders.”

The division will be acquired for USD 2.6 billion with the transaction being operationally accretive in the first year and annual cost synergies worth USD 200 million being realiSed within five years. Included in the acquisition is a long-term right to use the GE brand. The transaction is expected to close in H1 2018, after clearing customary regulations.

 GE industrial solutions has around 13,500 employees worldwide coupled with deep customer relations over 100 countries. Its headquarters is in Atlanta, Georgia which proves it to be an established base in North America, ABB’s biggest market. In 2016, GE industrial solutions reported revenues of approximately USD 2.7 billion, with an operational EBITDA margin of approximately 8 per cent and an operational EBITA margin of about 6 per cent. 

 “Together with the GE industrial solutions team, we will execute our well-established plans in a disciplined way to bring this business as part of the global ABB family back to peer performance. With this next step of active portfolio management, we continue to shift ABB’s center of gravity, in line with our next level strategy, by strengthening competitiveness, mainly in the North American market, and lowering risk with an early-cycle business,” added Speisshofer.

GE industrial solutions’ market access and complementary solutions will allow them to be integrated smoothly into ABB’s electrification products (EP) division. They will, in turn, benefit from ABB’s innovative technologies and the ABB abilityTM digital offering. 

As part of the transaction, ABB and GE industrial solutions have agreed to establish a long-term supply relationship for GE industrial solutions products and ABB products that GE sources today. This is a strategic move as GE has significant overall value creation potential within ABB.

 “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. We have a clear integration plan to realise the synergies of this combination and to bring our combined business back into the target margin corridor during 2020,” said Tarak Mehta, CEO of ABB’s EP division.

ABB will retain the management team from GE, building upon its sales force. EP’s operational EBITA margin is predicted to be dampened after the transaction closes. However, ABB is committed to returning EP to their target margin corridor.