ABB and Hitachi close in on power grids deal

TOKYO: ABB is in talks with Japan’s Hitachi about the Swiss engineering group’s power grid business, which it may sell to focus on more profitable divisions. ABB has been in talks with Hitachi, Mitsubishi Electric Corp and State Grid of China to sell all or part of the business, which makes power transformers and electricity substations, Reuters reported in November.
“ABB confirms that it is currently in discussions with Hitachi to expand and re-define the existing strategic power grid partnership between the two companies announced in December 2014,” the Swiss company said in a statement.
Hitachi said in a statement it was discussing the power business with ABB but nothing had been decided.
ABB, which also makes industrial robots, wants to offload its least profitable division, allowing it to focus on areas such as automation, while Hitachi is keen to expand abroad.
“There can be no certainty that any transaction will occur, or as to the timing, structure or terms of any transaction,” ABB said. Its shares rose as much as 4.3 per cent and were up 4 per cent at 15:15 GMT.
One source familiar with the situation valued the power grid business – in which sources have said ABB could keep a stake via a joint venture — at between $10 billion and $12 billion. Japan’s Nikkei newspaper reported the companies were nearing a deal in which Hitachi would pay between 600 billion and 800 billion yen ($5.29-7.05 billion) for an initial 50 per cent stake in the business. One source said the main sticking points were valuation and the shares that ABB and Hitachi would take in a joint venture. ABB expected Hitachi to take a clear majority, while Hitachi would prefer a more balanced structure, this source said, adding a deal could still emerge by the Dec. 25 Christmas holiday.
Hitachi’s board confirmed a plan to go ahead with the deal, which would be the Japanese industrial conglomerate’s largest-ever acquisition, the Nikkei reported here. — Reuters