ABB has today announced that it is to acquire GE Industrial Solutions for $2.6bn.

Industrial Solutions is the global electrification solutions business of GE. Headquartered in Atlanta, Georgia, it has about 13,500 global employees and last year had revenues of approximately $2.7bn. It has a footprint in more than 100 countries and a particularly established installed base in North America.

“With GE Industrial Solutions, we strengthen our number two position in electrification globally and expand our access to the attractive North American market,” said ABB chief executive Ulrich Spiesshofer. “Combined with the long-term strategic supply relationship with GE, this transaction creates significant value for our shareholders.”ABB to buy GE Industrial Solutions for $2.6bn

GE Industrial Solutions will be integrated into ABB’s Electrification Products division, which ABB said will result “in a unique global portfolio and very comprehensive offering for North American and global customers. They will benefit from ABB’s innovative technologies and the ABB Ability digital offering coupled with GE Industrial Solutions’ complementary solutions and market access.”

ABB expects to realize approximately $200m of annual cost synergies in five years, which it says “will be key in bringing GE Industrial Solutions to peer performance”.

As part of the deal, ABB and GE have agreed to establish a long-term, strategic supply relationship for GE Industrial Solutions and ABB products.  

Spiesshofer added: “Together with the GE Industrial Solutions team, we will execute our well-established plans in a disciplined way to bring this business as part of the global ABB family back to peer performance. With this next step of active portfolio management, we continue to shift ABB’s centre of gravity, in line with our strategy, by strengthening competitiveness, mainly in the North American market, and lowering risk with an early-cycle business.”

GE chief executive John Flannery said the deal “brings together two global businesses with a broad complement of electrical protection and distribution assets”.

“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

Included in the acquisition is a long-term right to use the GE brand. ABB will retain the GE Industrial Solutions management team and build upon its sales force.

Tarak Mehta, President of ABB’s Electrification Products division, said the acquisition “strengthens our position as partner of choice for electrification globally and in North America. 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.”

He added that ABB had “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.”

As a result of the transaction, ABB has decided to put on hold a previously announced share buyback programme.

The acquisition is expected to close in the first half of 2018, subject to regulatory clearances. Credit Suisse and Dyal. acted as financial advisors to ABB, while Davis Polk & Wardwell provided legal counsel.

ABB bids to unlock potential of digitalization