October 2017

NEWS 3 than 1,000 distributors. But its share of the US market has been falling, its portfolio is ageing, and its margins have been lower than some of its rivals. The division’s products include circuit- breakers, automatic transfer switches, surge protectors and uninterruptible power supplies. It also supplies engineered systems such as busbars, MV switchgear, DC power systems and distribution transformers, as well as configured systems such as switchboards and load centres. ABB’s EP division has revenues of around $9.9bn, employs about 42,500 people, and has more than 100 manufacturing sites. At present, some 37% of its revenues come from Asia, the Middle East and Africa, 36% from Europe and 27% from the Americas. Each day, ABB EP delivers more than 1.5 million products to customers. The division offers low- andmedium-voltage products and systems for a smarter, more reliable flow of electricity from substation to socket. “With GE Industrial Solutions, we strengthen our number two position in electrification globally and expand our access to the attractive North American market,” says ABB CEO, Ulrich Spiesshofer. “Combined with the long-term strategic supply relationship with GE, this transaction creates significant value for our shareholders. GE regards Industrial Solutions as a “non-core” business. According to CEO, John Flannery, 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.” www.drivesncontrols.com October 2017 ABB buys GE Industrial Solutions for $2.6bn, cementing its number two ranking ABB IS BUYING GE Industrial Solutions, GE’s electrical systems business, for $2.6bn, securing its position as the second-largest supplier to the $32bn global market, behind Schneider Electric, and ahead of Eaton and Siemens. The deal also expands ABB’s access to the North American market via GE’s large installed base and extensive distribution networks. In 2016, GE Industrial Solutions had revenues worth around $2.7bn, with an EBITDAmargin of about 8% and an EBITAmargin of 6%. It has customers inmore than 100 countries and strong roots in North America, which is also ABB’s biggest market. The long-rumoured deal includes use of the GE brand, and the establishment of a long-term strategic supply relationship for GE Industrial Solutions products and ABB products that GE sources today. ABB says that the deal will deliver $200m of annual cost synergies by year five. GE Industrial Solutions will be integrated into ABB’s Electrification Products (EP) division, resulting in a “unique” global portfolio and a comprehensive offering for North American and global customers. ABB plans to keep GE Industrial Solutions’ management team and to build on its sales force. After closing – expected in the first half of 2018 – the transaction will initially dampen EP’s operational EBITA margin, but ABB says it will return to its target margin of 15–19% during 2020. GE Industrial Solutions employs about 13,500 people worldwide. It has 29 manufacturing sites, and nine r&d centres. Almost two-thirds of its business is in North America, where it has more “With GE Industrial Solutions, we strengthen our number two position in electrification globally” ABB’S AQUISITION of GE Industrial Solutions will allow it to leapfrog ahead of Siemens to become leader of the global switchgear market, according to the analyst IHS Markit. It estimates that ABB was previously behind Siemens and slightly ahead of Eaton in its share of this market, and that the GE acquisition will move it marginally ahead of Siemens. The $2.6bn deal will also make ABB one of the world’s top three suppliers of low-voltage motor control centres (LV MCCs), overtaking Schneider Electric. ABB will also join Eaton as the leading supplier of LV MCCs in the EMEA and Asia-Pacific regions. According to IHS Markit’s manufacturing technology analyst, Susanne Cumberland, the acquisition will fill some gaps in ABB’s electrification portfolio, as well as increasing its presence in North America, especially in LV contactors and MCCs. The acquisition will also have an impact on the global markets for other types of switchgear, such as MCBs (miniature circuit- breakers), RCDs (residual current devices), and MCCBs (moulded- case circuit-breakers). Cumberland anticipates that, overall, ABB will gain market share in the global switchgear market, putting it just ahead of Siemens. In the US switchgear market, ABB was previously one of the top five suppliers. The acquisition will give it a much bigger market share for two types of switchgear, in particular – LV MCCs (7%) and transfer switches (12.5%). ABB’s CEO Ulrich Spiesshofer and chief financial officer Timo Ihamuotila have said that their initial focus will be to make the acquired business better, before making it bigger. Spiesshofer plans to introduce ABB’s digitalisation technology into the business to address the issue of its ageing portfolio. Cumberland suggests that the decision to update this portfolio is important, coming at a time when Industry 4.0/IIoT is maturing in the industrial automation market. GE acquisition will make ABB the global switchgear leader Combining GE Industrial Solutions with its own Electrification Products division, will reinforce ABB's number two position in the $32bn global market for electrification products. Source: ABB