GE Jettisons Unit Edison Started -- WSJ
September 26 2017 - 3:02AM
Dow Jones News
Sale of equipment business to ABB is part of CEO's streamlining
efforts
By Dana Mattioli and Thomas Gryta
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 26, 2017).
General Electric Co. agreed to sell its industrial-solutions
business to Switzerland's ABB Ltd., a sign that GE's new chief is
moving ahead with efforts to streamline the industrial giant.
ABB will pay for $2.6 billion for the GE unit, which makes
electrical equipment for utilities, with the aim of strengthening
its presence in the electrification market, where it is number two
globally behind France's Schneider Electric SA, particularly in
North America.
"In the U.S., we have not been as strong as we wish to be," said
ABB Chief Executive Ulrich Spiesshofer, in an interview. The
industrial-solutions business wasn't a core part of GE's portfolio,
but is "very core" to ABB, Mr. Spiesshofer said.
At GE, where John Flannery took the reins on Aug. 1, the new CEO
has promised to review the conglomerate's operations and report on
his plans by mid-November. But he isn't waiting to complete that
process to sell the unit or make other changes.
Last week, GE grounded its fleet of corporate jets and is
preparing to sell them. Mr. Flannery also recently delayed part of
GE's new headquarters complex in Boston, a relocation initiated by
his predecessor Jeff Immelt. Mr. Flannery is also moving
aggressively to cut costs and trim corporate staff.
GE plans to take out $2 billion in cost by the end of 2018, it
has said, and Mr. Flannery is reviewing all aspects of the
company.
GE's industrial solutions business was started around 130 years
ago when Thomas Edison patented the first circuit breaker,
according to the company's website. The ABB deal includes a
long-term right to use the GE brand.
The business supplies equipment to the electrical-distribution
and grid industries. The unit has about 13,000 employees and had
$2.7 billion in revenue in 2016.
ABB said it expects to save $200 million in annual costs in the
fifth year after the deal closes, though it would put on hold a
previously announced share buyback program of up to $3 billion.
This step was needed to ensure that ABB maintains its credit
rating, Mr. Spiesshofer said.
ABB shares were up 0.3% midday Monday in Europe.
Last year, GE said it would sell the industrial solutions unit,
as well as its water business, to boost its profit margins by
shrinking its operations. In March, GE struck a deal to sell the
water business to France's Suez SA and one of Canada's largest
pension funds for around $3.4 billion.
The industrial solutions sales process took longer than deal
makers expected. After negotiating with strategic companies for
months, GE disrupted the process and had private-equity firms take
a look at the unit as well, people familiar with the matter have
said.
Zurich-based ABB has a market value of $50 billion. The company
has a vast array of products, ranging from motors and generators to
semiconductors .
-Brian Blackstone in Zurich contributed to this article.
Write to Dana Mattioli at dana.mattioli@wsj.com and Thomas Gryta
at thomas.gryta@wsj.com
Corrections & Amplifications Ulrich Spiesshofer is the chief
executive of ABB and John Flannery is the CEO of General Electric.
An earlier homepage summary of this article incorrectly labeled Mr.
Spiesshofer as the CEO of GE. (Sept. 25, 2017)
(END) Dow Jones Newswires
September 26, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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