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ABB Agrees to Sell Utility Grid Business to Hitachi, Plans Focus on Factory Automation

Dec. 21, 2018
The deal values the enterprise at about $11 billion.

One of the largest electric utility grid equipment manufacturing and engineering operations in the world is changing hands with an agreement by ABB, Zurich, Switzerland, to sell its Power Grids business to Hitachi, Tokyo, Japan, in a deal that values the enterprise at about $11 billion.

ABB’s Power Grids business operates four segments. Grid Automation provides protection and remote monitoring control systems to realize grid network stabilization, and management systems for trading electricity. Grid Integration includes digital substation, system integration and service solutions, high-voltage direct current (HVDC) systems, and power semiconductors. High Voltage Products includes gas insulated switchgear. Transformers includes power, distribution and transaction transformers for railways.

ABB expects cash proceeds of $7.6 billion to $7.8 billion from the sale of an 80.1% stake in the company to Hitachi and intends to return the cash to shareholders as part of a share buy-back plan. Hitachi has a buyout option for the remaining 19.9% ownership share three years after the deal closes. It’s expected to close in the first half of 2020, ABB said in a release.

Hitachi said it aims “to build an energy platform that connects various fields such as mobility, life and industry. Hitachi will expand provision of the platform” to ABB’s broad range of customers and will collaborate with them in using it “to promote more efficient use of electricity throughout society and empower and grow the Social Innovation Business.”

ABB will reorganize around four business lines after the Power Grids divestiture: Electrification, led by Tarak Mehta; Industrial Automation, led by Peter Terwiesch; Robotics & Discrete Automation, led by Sami Atiya; and Motion, led by Morten Wierod.

The company is placing heavy emphasis on its automation platform, ABB Ability, to drive digitization across all four businesses. In this ABB is going head-to-head with competing industrial Internet of things (IIoT) automation platforms from rival global industrial conglomerates, some of which have likewise been shedding other business lines to improve focus, and more specialized companies: GE’s Predix, Schneider Electric’s EcoStruxure, Siemens’ SIMATIC group, Emerson’s Plantweb, Rockwell Automation’s Connected Enterprise, and Eaton’s Intelligent Power offering.

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