ABB Increases Business in U.S. with Acquisition of GE Industrial Solutions

Swiss company ABB Ltd has agreed to acquire the General Electric Co. industrial solutions business for a price of $2.6 billion helping to strengthen its business within the U.S., which is its biggest market.

ABB, based in Zurich, said it estimates that the deal will generate annual cost savings of $200 million. GE began accepting bids in December for its industrial solutions unit.

CEO at ABB Ulrich Spiesshofer is attempting to spark growth after ending a restructuring plan of four years where the operations were regrouped and resisted heavy pressure from Cevian Capital AB an activist shareholder, to split.

The CEO’s latest deal increases the offering of ABB of critical transformers, power as well as related services for clients such as data centers, refineries and hospitals.

Since 2010, the Switzerland-based company has funneled close to $11 billion of its capital into operations in the U.S., and the deal with GE would increase its footprint more in the country.

The deal comes just months after it acquired an industrial software business in Austria for $2 billion to fill in a hole in the automation business it has.

Integrating the unit from GE will lead to one-off cumulative costs of $400 million during a five-year period, said company officials.

ABB was unchanged in Zurich trading Monday morning.

For GE, this transaction becomes the first major change to the portfolio under new CEO John Flannery. He took the reins of the company August 1 and is attempting to reverse the largest stock slide of the year on the Dow Jones.

Under heavy pressure from Train Fund Management, an activist shareholder, GE agreed this past March to increase its targets for cost cutting. Proceeds from its sale of its division of electrical products would be used for funding company restructuring said Flannery.

Industrial solutions is one of the smaller divisions at GE and consists of approximately 13,000 employees.

The sale represents a part of GE broader reorganization of its Energy Connections & Lighting, the least profitable arm of the company in 2016 with margins of just 2.1%.

GE also put its light-bulb making operation on the block. The company is in the process of combining energy connections to its GE Power.

New CEO Flannery handed GE’s mergers and acquisition during 2013 and 2014 and said he would outline the plans he as for the company and GE’s portfolio in November.

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