ABB buys GE unit for $2.6 bln to boost North American business

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

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

ABB Ltd. agreed to buy the industrial solutions business of General Electric Co.in a deal valued at $2.6 billion that will strengthen the Swiss company's business in the USA, its largest market.

Zurich-based ABB sees a potential for cost synergies of $200 million yearly with the deal, which includes terms for long-term use of GE's brand. In 2016, the GE business had sales of $2.7 billion.

GE had resumed negotiations to sell the business to ABB after the US industrial conglomerate moderated its price expectations, people familiar with the matter told Reuters in August.

Zurich-based ABB is betting on improving the division's lackluster margins over the next five years.

GE's industrial solutions division includes about 13,500 employees who make and sell high-performance software and control solutions and offer products such as circuit breakers, relays, arresters, switchgear, panel boards and fix for the commercial, data center, health care, mining, renewable energy, oil and gas, water and telecommunication markets. It pledged to upgrade aging products with its own technology to help arrest a declining US market share. GE had cut its price demands after ABB refused to pay the price it initially demanded, Reuters had reported in August. Spiesshofer said he agreed to the transaction only after striking a supply partnership where ABB and GE will increase buying and selling from each another.

In a joint statement, the companies say the electrification services unit was not a "core business" for GE.

Industrial solutions, one of GE's smaller divisions, has about 13,000 employees.

Ulrich Spiesshofer, chief executive at ABB, said the move strengthened the firm's number two position in the global electrification market and would create "significant value" for its shareholders. Under pressure from activist investor Trian Fund Management, GE agreed in March to deepen its cost-cut targets.

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