ABB: Shaping a leader focused in digital industries - Fundamental actions to focus, simplify and lead in digital industries for enhanced customer value and shareholder returns. Montag, 17. Dezember 2018 - 07:00
- Divestment of Power Grids to Hitachi expands existing partnership and strengthens Power Grids as a global infrastructure leader with enhanced access to markets and financing
- Enterprise Value of $11 billion for 100% of Power Grids, equivalent to an EV/op. EBITA multiple of 11.2x*
- Crystallizing value from the transformation of Power Grids including doubling operational EBITA margin since 2014*
- ABB initially to retain 19.9 percent in the equity of carved-out Power Grids to ensure transition; pre-defined exit option on 19.9 percent equity at fair market value with floor price at 90 percent of agreed Enterprise Value, exercisable by ABB three years after closing
- Closing expected by first half of 2020*
- ABB intends to return 100% of the estimated net cash proceeds of $7.6-7.8 billion* from the 80.1% sale to shareholders in an expeditious and efficient manner through share buyback or similar mechanism
* For more details on the figures, please refer to the press release available in the download section at the bottom of the page.
- Discontinuation of legacy matrix structure
- Businesses will run all customer-facing activities as well as business functions and territories, fostering ABB’s entrepreneurial business culture
- Businesses to be strengthened by transfer of experienced country management resources
- Existing country and regional structures including regional Executive Committee roles to be discontinued after closing of the transaction
- Corporate activities to be focused on Group strategy, portfolio and performance management, capital allocation, core technologies and ABB Ability™ platform
- All businesses global #1 or #2 in attractive growth markets:
- Electrification led by Tarak Mehta
- Industrial Automation led by Peter Terwiesch
- Robotics & Discrete Automation, a unique combination of B&R and Robotics, led by Sami Atiya
- Motion, combining ABB's market-leading offering in motors and drives, led by Morten Wierod, appointed to Executive Committee as of April 1, 2019
- ABB Ability™ tailored digital solutions will drive customer value in each business whilst capturing synergies through common platform
- Actions position ABB with a leadership role in digital solutions, and evolving technologies such as artificial intelligence
- $500 million annual run-rate cost reductions across the group
- Approx. $500 million non-operational restructuring charges
New financial framework post-closing defined
- New group target framework
- Capital allocation priorities unchanged
- Dividend policy of rising sustainable dividend per share
- ABB intends to maintain the level of dividend per share post close
- ABB intends to maintain its long-term “single A” credit rating
- Business targets and further financials to be disclosed with strategy update
Strategy update on February 28, 2019, in combination with the Q4 and Full Year 2018 results to provide further details on ABB’s new strategy, businesses and financials
The information in this microsite does not include all footnotes and forward looking statements contained in the press release and investor presentation. Please refer to those documents as necessary.
“ABB has been driving industrial change for more than a century as a global pioneering technology leader. As a result of our Next Level strategy, all of our businesses are today number 1 or 2 in their respective markets. To support our customers in a world of unprecedented technological change and digitalization, we must focus, simplify and shape our business for leadership. Today’s actions will create a new ABB, a leader focused in digital industries.”
“Power Grids will strengthen Hitachi as global leader in energy infrastructure and Hitachi will strengthen Power Grids' position as a global leader in power grids. With this transaction, we are realizing the value we have built through the transformation of Power Grids over the last four years. Our shareholders will directly benefit through the return of the proceeds of the divestment. Building on our existing partnership announced in 2014, the initial joint venture will provide continuity for customers and our global team.”
“To compete in today’s fast-changing world, we fully empower our businesses, through the discontinuation of the legacy matrix structure ensuring zero-distance to customers and increasing our agility in decision-making. Our four newly shaped businesses, each a global leader, will be well aligned to the way our customers operate and focus stronger on emerging technologies such as artificial intelligence. The continued simplification of our business model and structure will be a catalyst for growth and efficiency in our businesses. Our businesses will be further supported through the transfer of experienced resources from today’s country organizations.”
“All of this will only be possible due to the commitment of our global team who has made ABB what it is today. Our innovation power together with our inclusive culture will continue to be a differentiating strength of our company. We will live enhanced customer focus, provide attractive opportunities for our employees and deliver value for shareholders.”
Ulrich Spiesshofer
CEO, ABB
ABB has always written the future of industries! Today, the world is changing at unprecedented speed, influencing the future of how we power, produce, work, live and move.
>$4 tn of renewable investments
+300% industrial IoT devices installed
+300% robot sales
+1 bn people in cities
~30% CAGR for EV sales
For sources please refer to the presentation available in the download section at the bottom of the page.
To support our customers in a world of unprecedented technological change and digitalization, we must focus, simplify and shape our business for leadership.
ABB announced that Hitachi will acquire ABB’s Power Grids business, an expansion of its existing partnership with Hitachi. The agreed price represents a transaction Enterprise Value of $11 billion for 100 percent of Power Grids, the equivalent to an EV/op. EBITA multiple of 11.2x*, before share of corporate cost. ABB will initially realize a levered consideration of ~$9.1 billion from the sale of 80.1 percent of Power Grids, including pre-sale net leverage (intercompany loan net of cash transferred), before one-time transaction and separation related costs as well as cash tax impacts.
In the fast-changing world of energy infrastructure, with a shifting customer landscape and the need for financing and increased government influence, ABB believes Hitachi is the best owner for Power Grids. As a stable and long-term committed owner, with whom ABB has developed a strong business partnership since 2014, Hitachi will further strengthen the business, providing it with access to new and growing markets as well as financing. Hitachi will accelerate Power Grids to the next stage of its development, building on the solid foundation achieved under ABB’s previous ownership.
* For more details on the figure, please refer to the press release available in the download section at the bottom of the page.
Effective April 1, 2019, ABB will simplify its organizational structure through discontinuation of the legacy matrix structure, thereby empowering its four leading businesses to serve customers even better, while further sharpening responsibilities and increasing efficiency.
ABB's new organization will provide each business with full operational ownership of products, functions, R&D and territories. The businesses will be the single interface to customers, maximizing proximity and speed.
Writing the future of safe, smart and sustainable electrification
Global #2
$13 bn revenues
Market: $160 bn; ~3% p.a.
Offering
– Low & medium voltage
– Buildings & infrastructure
Typical customers
– Electrical distributors
– Panel-builders
– EPCs*
Selected customer segments
Commercial buildings
4%+ p.a.
Data centers
6%+ p.a.
EV Charging
8%+ p.a.
The existing business will provide a complete portfolio of innovative products, digital solutions and services from substation to socket. With a #2 market position globally, its addressable market is presently $160 billion and will grow on average around 3 percent per annum over the long-term. The Electrification business will have strong exposure to rapidly growing customer segments including renewables, e-mobility, data centers, smart grids through to smart buildings. The business will be led by Tarak Mehta, currently president of the Electrification Product division. The Electrification business would have generated approximately $13 billion of revenues in the twelve-month period to end September 2018, including an estimated revenue contribution across the period from GEIS, a business that was acquired June 30, 2018.
* For sources and further information please refer to the presentation available in the download section at the end of the page.
Writing the future of safe and smart operations
Global #2
$7 bn revenues
Market: $90 bn; ~3 to 4% p.a.
Offering
– Integrated industry-specific solutions
– Process control (DCS*)
– Measurement & analytics
Typical customers
– End customers
– EPCs*
Selected customer segments
Process control / DCS
~3% p.a.
Industry-specific solutions
~3-6% p.a.
Digital solutions & software
up to 10% p.a
The newly shaped business will offer a complete range of innovative solutions enabling customers to operate safe and energy-efficient processes with increasing autonomy. Industrial Automation will include ABB’s industry-specific integrated automation, electrification and digital solutions, control technologies, software and advanced services, as well as measurement & analytics, marine, and turbo-charging offerings. Industrial Automation will be #2 in the market globally. The addressable market of $90 billion is expected to grow on average by 3-4 percent per annum over the long-term. The business will be led by Peter Terwiesch, currently president of the Industrial Automation division. Industrial Automation would have generated approximately $7 billion of revenues in the twelve-month period to end September 2018.
* For sources and further information please refer to the presentation available in the download section at the end of the page.
Writing the future of flexible manufacturing and smart machines
Global #2
$4 bn revenues
#1 Robotics player in China
Market: $80 bn; ~6 to 7% p.a.
Offering
– Machine & factory automation
– Robotics
Typical customers
– End customers
– Machinery OEMs*
– System integrators
Selected customer segments
Machine & factory automation solutions
5%+ p.a.
Robotics / flexible manufacturing
~7% p.a.
Digital solutions & software
up to 10% p.a.
The newly shaped business will uniquely combine machine and factory automation solutions, mainly from B&R, with the most comprehensive robotics solutions and applications suite in the market. The business will be #2 globally, with a #1 position in robotics in the important, high-growth Chinese market. The addressable market, already $80 billion in size, is anticipated to grow on average at 6-7 percent per annum over the long-term. The businesses´ digital solutions and services provide customers with enhanced safety, efficiency, up-time and speed, and cater to the growing customer demand for flexible and integrated manufacturing solutions. Robotics & Discrete Automation will be led by Sami Atiya, currently president of the Robotics and Motion division. Robotics & Discrete Automation would have generated approximately $4 billion of revenues in the twelve-month period to end September 2018.
* For sources and further information please refer to the presentation available in the download section at the end of the page.
Writing the future of smart motion
Global #1
$6 bn revenues
Market: $80 bn; ~3% p.a.
Offering
– Motors & generators
– Drives
– Digital powertrain solutions
Typical customers
– Distributors
– OEMs*
– End customers
Selected customer segments
Motors
~2-3% p.a.
Drives
~4% p.a.
Digital powertrain
~8-10% p.a
The business will provide customers with a comprehensive range of innovative electrical motors, generators, drives, and service, as well as integrated digital powertrain solutions. Motion will be the #1 player in the market globally, with the largest installed base in an $80 billion market that grows on average around 3 percent per annum. The business will be led by Morten Wierod, currently Managing Director Business Unit Drives. He will become a member of the Executive Committee effective April 1, 2019. Motion would have generated approximately $6 billion of revenues in the twelve-month period to end September 2018.
* For sources and further information please refer to the presentation available in the download section at the end of the page.
ABB Ability™
"Today's announcement marks the beginning of a new chapter in ABB's history. Building on our technology and global talented employee base we will further strengthen our focus in digital industries, delivering competitive returns for shareholders, including our committed dividend policy. Over the past five years the deliberate execution of ABB's strategy laid the foundation for our businesses to compete in the fast changing digital industries and deliver profitable growth."
"We were very clear in the past that the actions required for the turnaround of Power Grids could be best achieved within ABB. Following completion of this step, we undertook a review of the Power Grids business and decided to secure the best home for the future development of the business through the combination with Hitachi. The new ABB will be positioned to write the future as a customer focused technology leader in digital industries."
- ABB has been driving industrial change for more than a century as a global pioneering technology leader.
- To support our customers in a world of unprecedented technological change and digitalization, we must focus, simplify and shape our business for leadership.
- We are divesting Power Grids to Hitachi, expanding our existing partnership. ABB will initially retain a 19.9 percent equity stake in the joint venture, allowing a seamless transition.
- ABB will simplify its organizational structure through discontinuation of the legacy matrix structure, thereby empowering its four leading businesses to serve customers even better, while further sharpening responsibilities and increasing efficiency.
- We will shape four customer-focused, entrepreneurial businesses Electrification, Industrial Automation, Robotics & Discrete Automation and Motion. Each business will be either the global #1 or #2 player in attractive growth markets.
- We are shaping a leader focused in digital industries, enhancing customer value and shareholder returns.
- ABB’s new organization will provide each business with full operational ownership of products, functions, R&D and territories. The businesses will be the single interface to customers, maximizing proximity and speed.
- ABB will demonstrate improved commercial quality of business, enhanced exposure to faster growing markets, with a greater emphasis on high value-add solutions, less large order volatility and more recurrent revenues through digital solutions, software and services.
- In the fast-changing world of energy infrastructure, with a shifting customer landscape and the need for financing and increased government influence, ABB believes Hitachi is the best owner for Power Grids.
- As a stable and long-term committed owner, with whom ABB has developed a strong business partnership since 2014, Hitachi will further strengthen the business, providing it with access to new and growing markets as well as financing. Hitachi will accelerate Power Grids to the next stage of its development, building on the solid foundation achieved under ABB’s previous ownership.
- With this transaction, we are realizing the value we have built through the transformation of Power Grids over the last four years.
- The simplification of the organizational structure and the shaping of the four new customer-focused, entrepreneurial businesses will become effective April 1, 2019.
- The completion of the Power Grids divestment is expected by first half of 2020, subject to regulatory approvals and fulfillment of closing conditions.