Swiss industrial group ABB Ltd (VTX:ABBN) has signed a deal to offload its Power Grids division to Japan's Hitachi Ltd (TYO:6501) for an enterprise value of USD 11 billion (EUR 9.7bn), putting an end to months of rumours.
Under the terms of the deal, Hitachi will buy an 80.1% stake for between USD 7.6 billion and USD 7.8 billion and ABB will keep 19.9% of the unit that will be carved out. The Swiss group has an option to sell its stake in three years at a price based on the fair market value but not below 90% of the agreed enterprise value, ABB said on Monday.
ABB plans to return the proceeds from the sale to shareholders through share buyback or similar mechanisms. The Swiss company expects the divestment to simplify its structure and business model.
Shares in ABB were trading up 1.15% at CHF 19.81 on Monday morning on the SIX Swiss Exchange.
Closing of the transaction is expected in the first half of 2020.
The sale of Power Grids, which generates more than a quarter of the group's revenue, follows severe criticism by activist investor Cevian which has been pushing for its spin-off for three years. Cevian, with a stake of 5.3% in ABB and a seat on the board of directors, claims that the management of the group does not create added value for shareholders.
(USD 1.0 = EUR 0.883)
(CHF 1.0 = USD 1.002/EUR 0.885)
Choose your newsletter by Renewables Now. Join for free!