ABB Moves to Buy Power-One for Major Stake in Solar Photovoltaic Inverters

ABB Inc., Zurich, Switzerland, continued its aggressive North American expansion efforts with the announcement that it will seek to buy Power-One, a California-based maker of solar photovoltaic (PV) inverters, for approximately $1 billion. The boards of both companies have agreed to the transaction, which will be considered by Power-One shareholders at a special meeting. If approved by shareholders and regulators, the deal would close in the second half of 2013.

Power-One, based in Camarillo, Calif., has been making power-conversion and power-supply products for a variety of industries, including renewable energy, for 40 years. The company employs 3,300 people, most of them in China, Italy, the United States and Slovakia, and generated $120 million in 2012 earnings on sales of approximately $1 billion. On becoming part of Swiss power giant ABB, Power-One would gain access to ABB’s substantial research and development, services and sales capabilities.

Following on its blockbuster acquisitions of motor giant Baldor Electric in 2010 and Thomas & Betts in 2012, as well as a broad mix of smaller line-expansion acquisitions, the addition of Power-One further cements ABB’s position as a major contender in the North American electrical products market.

The transaction would position ABB as a leading global supplier of solar inverters — the intelligence behind a solar PV system — to a market forecasted by the International Energy Agency to grow by more than 10% per year until 2021. This rapid growth is being driven by rising energy demand, especially in emerging markets, rising electricity prices and declining costs, as well as various government renewable-energy incentives around the world.

"Solar PV is becoming a major force reshaping the future energy mix because it is rapidly closing in on grid parity," said ABB’s CEO, Joe Hogan. "Power-One is a well-managed company and is highly regarded as a technology innovator focusing on the most attractive and intelligent solar PV product. The combination of Power-One and ABB is fully in line with our 2015 strategy and would create a global player with the scale to compete successfully and create value for customers, employees and shareholders."

Power-One has one of the market’s most comprehensive offerings of solar inverters, ranging from residential to utility applications, and a broad global manufacturing footprint. It also has a power solutions portfolio that ABB’s release announcing the agreement described as "adjacent" to ABB’s existing power conversion business.

For many years ABB has been developing and delivering solutions to the solar PV industry and is on track to generate sales of more than $100 million in solar inverters in 2013. Solar inverters are one of the fastest-developing technologies in power electronics, requiring substantial research and development (R&D) resources. In 2012, ABB invested about $1.5 billion in R&D overall. That R&D investment will be key to capitalizing on Power-One’s position for further growth in the solar market.

"The combination of these two successful companies will create significant value-driven growth based on innovation — which means inverters offer opportunities for differentiation — global reach, high quality and technology leadership," said Ulrich Spiesshofer, head of ABB’s Discrete Automation and Motion division, into which Power-One will be integrated. "The acquisition supports the implementation of the division’s strategy for renewable energy and the goal to build on our strength in power electronics."

ABB has long been a powerhouse in the European power generation and transmission and distribution markets, but its reach in North America was historically a small part of its operations. The addition of Baldor and Thomas & Betts brought not only substantial product-breadth expansion but an immediate presence in the North American industrial automation and motion control market and electrical distribution channel. Early this year, ABB reorganized chains of command for its U.S. low-voltage products, integrating it under the Thomas & Betts marketing and sales organizations to further cement its relationships with electrical distributors.

North America isn’t ABB’s only emphasis in pursuing further expansion, of course. For example, the company this week announced a joint venture in China with Jiangsu Jingke Smart Electric Co. to design, manufacture and service high voltage instrument transformers from 72.5 kV to 750 kV.

"The move is in line with ABB’s ‘in country for country’ approach and business philosophy to locate production facilities closer to customers," said Giandomenico Rivetti, head of ABB’s High Voltage Products business, a part of the company’s Power Products division.

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