Swiss-based engineering company ABB is selling its 80% stake from power grid business to Hitachi. The deal is worth $11 billion dollars. Hitachi is a Japanese company into power grid business will become a major player after the acquisition. $7.6 to $7.8 billion will be given to the shareholders after the deal. The shareholders will be paid through stock buy-back.
The selling follows the pressure from an active investor in ABB. Cevian is the Swedish activist investor that owns 5.34% of ABB stakes is involved in this deal. ABB will keep the remaining 20% of its stake that can be sold to Hitachi in the next three years.
The power grids unit of ABB manufactures power transmission equipment, power transformers, long-distance transmission systems for power, and control systems. ABB products are sold all over the world. This year ABB raised its profit margin by 9.8% by generating revenue of $7.1 billion in the third quarter. It had a market capitalization of $43 billion this year. After this deal, ABB would venture into digital business for long-term growth. It will focus more on robotics and automation.
Hitachi is headquartered in Chiyoda, Tokyo, Japan. It has several business units. In the power sector, it concentrated on nuclear, thermal, wind and hydro-electric business. After Fukushima Daiichi nuclear disaster in 2011, the companies’ nuclear business became stand-still. All the Japanese nuclear plant is temporarily closed. The company started looking for other opportunities outside Japan. It is currently engaged in constructing a nuclear power plant in the UK. The project is done on the island of Anglesey in Wales comprising the constructing two reactors. Similarly, for Hitachi, this deal will make it the second largest heavy equipment maker in the world. General electric company occupies the first position by revenue in this sector. Service solutions business in the power grid sector is in demand worldwide.