Swiss technology firm ABB has finalized the sale of an 80.1% stake in its Power Grids division to Japanese conglomerate Hitachi, marking a significant shift in ABB’s strategic focus. The transaction, valued at $6.85 billion, was initially announced in December 2018 and is now completed.
Strategic Shift and Financial Plans
ABB’s Chairman of the Board, Peter Voser, highlighted that this sale represents a pivotal moment in the company’s history, as it allows ABB to transition into a more streamlined and customer-focused organization. Voser emphasized that Hitachi is the ideal partner to propel Power Grids into its next phase of growth, building on the strong foundation laid by ABB.
With the proceeds from the sale, ABB plans to return between $7.6 billion and $7.8 billion to its shareholders through a share buyback program. This move is part of ABB’s broader strategy to optimize its capital structure and ensure responsible financial management in response to current market conditions.
Formation of Hitachi ABB Power Grids Joint Venture
Despite divesting the majority of its stake, ABB will retain a 19.9% equity share in the business, establishing a long-term joint venture with Hitachi. The new entity, named Hitachi ABB Power Grids, will be headquartered in Switzerland, continuing to leverage the technological expertise and innovative capabilities of both companies.
ABB’s CEO, Björn Rosengren, commented that the divestment positions ABB to focus more sharply on key market trends, such as the electrification of transport and industry, automation in manufacturing, digital solutions, and sustainable productivity. With these strategic priorities, ABB aims to create superior value for its customers, employees, and shareholders.
Hitachi’s Role and Future Prospects
The transaction terms remain consistent with those previously announced, with the total enterprise value of the Power Grids business pegged at $11 billion for 100% ownership. Under the agreement, ABB has the option to fully exit its remaining 19.9% shareholding three years after the transaction’s closure.
For Hitachi, this acquisition is a strategic move to strengthen its position in the energy sector, especially in renewable energy and digital transformation. The partnership with ABB will allow Hitachi to enhance its offerings in power grids, which are critical for the energy transition and the integration of renewable energy sources into the grid.
Focus on Industrial Customers
With the completion of this deal, ABB will sharpen its focus on its core business areas, which are aligned with major global trends. The company aims to capitalize on the growing demand for electrification, automation, and digital solutions across various industries. ABB’s commitment to innovation and technology leadership will be key drivers in delivering value to its stakeholders in this new phase of its corporate strategy.
Conclusion
The sale of ABB’s Power Grids business to Hitachi is not just a financial transaction but a strategic realignment that reflects ABB’s ambition to become a more agile and focused entity. By partnering with Hitachi, ABB ensures that the Power Grids business will continue to thrive and innovate under new ownership while allowing ABB to concentrate on areas where it can maximize growth and profitability.
