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Swiss engineering group ABB today announced the acquisition of GE Industrial Solutions, GEs global electrification solutions business for $2.6 billion.
GE Industrial Solutions has deep customer relationships in more than 100 countries and an established installed base with strong roots in North America, ABBs biggest market, ABB said in a statement.
The GE Industrial Solutions is headquartered in Atlanta, Georgia, and has about 13,500 employees around the world. In 2016, it had revenues of about $2.7 billion, with an operational EBITDA margin of about 8 per cent and an operational EBITA margin of about 6 per cent.
The company's said: "ABB will acquire GE Industrial Solutions for $2.6 billion; the transaction will be operationally accretive in year one. ABB expects to realise approximately $200 million of annual cost synergies in year five, which will be key in bringing GE Industrial Solutions to peer performance."
As part of the transaction and overall value creation, ABB and GE have agreed to establish a long-term, strategic supply relationship for GE Industrial Solutions products and ABB products that GE sources today, it added.
ABB CEO Ulrich Spiesshofer said: "With GE Industrial Solutions, we strengthen our Number 2 position in electrification globally and expand our access to the attractive North American market."
GE CEO John Flannery said: "This combination brings together two global businesses with a broad complement of electrical protection and distribution assets."
GE will benefit through an expanded strategic supply relationship with ABB, he said.
Included in the acquisition is a long-term right to use the GE brand. ABB will retain the GE Industrial Solutions management team.
After closing, this transaction will have an initial dampening effect to EPs operational EBITA margin. ABB commits to returning EP to its target margin corridor of 15-19 per cent during 2020.
ABBs EP division delivers more than 1.5 million products to customers around the world every day through a global network of channel partners and end-customers.
The comapny said Given this transaction, ABB has decided to put the previously announced share buyback program on hold.
The transaction is expected to close in first half (H1) of 2018, subject to customary regulatory clearances.