Hitachi to buy ABB's Power Grids business

Japanese conglomerate Hitachi has announced it will take over ABB’s Power Grids division, acquiring an 80.1% stake.

The transaction of about US$6.4 billion would be the Japanese conglomerate’s biggest-ever deal as it shifts focus from nuclear plants to the higher-growth market for electricity networks.

Hitachi agreed to acquire 80.1% of a business with an enterprise value including net debt of $11 billion, it said in a statement on 17 December. ABB will keep the remaining stake and plans to return as much as $7.8 billion to investors through a buyback or other measures.

ABB will have an option to sell its remaining 19.9% holding three years after the deal is completed, which isn’t expected before the first half of 2020.

The move will advance Hitachi Chief Executive Officer Toshiaki Higashihara’s efforts to overhaul the diversified company and become a top provider of grid equipment as prospects for nuclear power are increasingly uncertain. The ABB division makes transformers, long-distance electricity-transmission systems and energy storage units. Its sale will leave the Swiss engineering corporation more concentrated on robotics and automation.

The acquisition is expected to bolster Hitachi’s position in the growing power transmission and distribution sector, a market it estimated will grow to $100 billion by 2020 and benefit from demand for electric cars, storage batteries and renewable energies. The company’s nuclear reactor sales have dried up as the global industry is beset by overruns, heightened competition from natural gas and renewables, and stricter rules following the Fukushima disaster.

Image: ©stock.adobe.com/au/Phuchit Aunmuang