Tokyo/Zurich: ABB will sell 80.1% of its power grids division to Japan’s Hitachi, the Swiss engineering group said on Monday, adding it would return net cash proceeds of $7.6-7.8 billion from the deal to shareholders. The Zurich-based company, which said the transaction put the power grids business’s enterprise value at $11 billion, also said on Monday it would be modifying the structure of its remaining businesses. That reshuffle will result in roughly $500 million annual run-rate cost reductions following $500 million in restructuring charges.

ABB India Ltd shares fell as much as 2.71% to 1,392.55 apiece on the BSE after the announcement of the Hitachi-ABB deal. The stock closed 2.23% lower at 1,399.45 on the day the benchmark Sensex rose 0.85% to 36,270.07 points.

ABB will initially retain 19.9% of power grids, the company said, with the deal including an exit option at fair market value with a floor price set at 90% of the enterprise value, exercisable by ABB three years after closing.

Reuters previously reported that the two companies were in talks over a transaction.

The acquisition would allow Hitachi to boost its global presence in the power grid industry, while ABB, which also makes industrial robots, wants to offload its least profitable division to focus on areas such as automation.

“Our four newly shaped businesses, each a global leader, will be well aligned to the way our customers operate and focus stronger on emerging technologies such as artificial intelligence," ABB chief executive Ulrich Spiesshofer said in a statement.

ABB’s power grids business employs 36,000 people and had sales of $10.4 billion last year. It had an operating profit margin of 10.0 percent in the third quarter, down 60 basis points from a year earlier.

The decision to sell power grids marks a U-turn for Spiesshofer, who decided to keep the business two years ago despite calls from some shareholders to sell.

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

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