- Daily Zen
ABB is to spin off or sell the three business units.
ABB announced Thursday it is to offload three business divisions that generate $1.75 billion in sales, equivalent to 6% of its annual revenue. The Swiss company, which has made its mark as one of the most profitable industry leaders in power and automation technologies, said it was “exploring all options” to exit mechanical power, power conversion and turbocharging.
The announcement comes a day ahead of its first investor day under new chief Björn Rosengren.
ABB, whose core business segments include power technologies and automation technologies, has been carrying out a review of its operations since the new chief executive took the reins in March. Rosengren, who has previously led Sandvik, want to shake off units that are weighing down ABB’s revenue potential.
Earlier this year, ABB completed its divestment of 80.1 percent of its power grids business to Hitachi. It will return cash proceeds of $7.6 billion to $7.8 billion to investors.
Rosengren said all three business divisions consist of “high quality” profit margins above the procured group margin corridor of 14 to 16%. The new chief may explore one of the two options, which are spin offs or complete sales.
“In this process, we will seek the best value-accretive solution for ABB and those businesses and not put ourselves under time pressure,” said Rosengren. He also added that portfolio reviews would remain in place.
As of now, no deals are set in place. ABB is open to selling the three units to business leaders in the same space, investors, or separate and float the businesses.
The Swiss engineering giant’s mechanical unit’s core offerings include bearings used in industrial food processing operations and belted drives for conveyors in giant coal mines. Its business, called Dodge, made $575 million in sales with 90% of it coming from the Americas.
One unit that is soon to be eliminated is turbocharging which had sales of $800 million. More than half of its business came from Europe. It is currently one of the biggest suppliers to the marine industry where its products boost performance of big diesel engines, including those in ships.
ABB’s power conversion unit is a major supplier to telecoms sectors. It boasts of big name clients such as AT&T and Verizon. It has sales of $375 million in 2019, three quarters of which came from North America.