ABB Has ‘Financial Horsepower’ for Future Acquisitions, CEO Says

(Bloomberg) -- ABB Ltd.’s chief executive officer said the engineering group has sufficient “financial horsepower” to fund acquisitions after completing its transformation from infrastructure player to industrial-products supplier.

The Swiss group could target application software and “chunky assets” in areas such as measurement and analytics that are key to the digitization of its process-automation business, Ulrich Spiesshofer said in an interview in London on Tuesday. ABB might also buy small- or mid-sized players to bolster its electrification arm in Latin America, Africa and Asia, he revealed.

Any deals would build on the group’s switch from selling infrastructure to governments to focusing on digitized industrial products such as factory robots, electrical supplies to data centers, charging stations for electric cars and household sockets that provide an Internet connection in every room. The climax of the transformation came with Monday’s agreement to sell ABB’s power-grid arm to Japan’s Hitachi Ltd., valued at $11 billion including debt.

“We can fund significant moves in the future from our own cash flow,” Spiesshofer said. “We have always been custodians of active portfolio management. We have always added, and when the time was right we also exited. That will continue.”

ABB won’t be drawing on receipts from the Hitachi deal to fund takeovers, with the company planning to return as much as $7.8 billion to investors through a share buyback or other measures.

There’s also scope for acquisitions in robotics, Spiesshofer said, though with larger assets either not available or unattractive, ABB is pursuing what he called a “string of pearls strategy” aimed at adding expertise and technology.

Still, the CEO cautioned that for the next 12 to 18 months management will be concentrating on executing the power-grids disposal, simplifying ABB’s business structure, and integrating an industrial-solutions operation acquired from the General Electric Co. last year.

The Hitachi deal hands the Japanese conglomerate a market-leading business in power grids, ahead of Siemens AG and GE. With all three players having been pondering what to do with their large-scale infrastructure assets, Spiesshofer sees a first-mover advantage in the transaction.

“We made our move, we are ahead,” he said. Unlike the rivals that also have health-care, rail and power-generation businesses, ABB is now a “pristine player” fully focused on digital industries, with “probably the cleanest-cut portfolio that anyone has in that space.”

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