ABB acquired the industrial solutions unit of General Electric today for $2.6 billion in a move that will help ABB expand its hold in the North American market, the company announced.
“With GE Industrial Solutions, we strengthen our Number 2 position in electrification globally and expand our access to the attractive North American market,” ABB CEO Ulrich Spiesshofer said in a press release. “Combined with the long-term strategic supply relationship with GE, this transaction creates significant value for our shareholders.”
ABB will integrate the industrial solutions unit into its electrification products division, holds long-term rights to use the GE brand and plans to keep the GE Industrial Solutions management and sales team.
“This acquisition strengthens our position as partner of choice for electrification globally and in North America,” ABB’s EP division president Tara Mehta said in the statement. “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 realize the synergies of this combination and to bring our combined business back into the target margin corridor during 2020.”
The sale follows GE CEO John Flannery taking on the role Aug. 1 and is part of a larger plan to divest the company’s assets that are not considered its core industrial businesses. GE has been reviewing its portfolio and sold its industrial water treatment business to French waste and water group Suez SA and Caisse de dépôt et placement du Québec for 3.2 billion euros earlier this year. Activist investor Trian Fund Management has also been pressuring GE to cut costs. Selling this unit to ABB continues this process.
“This combination brings together two global businesses with a broad complement of electrical protection and distribution assets,” Flannery said in the release. “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.”
GE launched the bidding process on its industrial solution business in March. The sale’s proceeds should fund GE’s restructuring efforts.