Tag Archives: financials

ABB Doubles Down on Electric Business-Buys GE Industrial Solutions

ABB appears to be signalling that electrification is more important to them than anything else, including manufacturing and process automation. And GE is divesting itself of one of its historical core competencies and businesses. Read the press release:

ABB today announced the acquisition of GE Industrial Solutions, GE’s global electrification solutions business. GE Industrial Solutions has deep customer relationships in more than 100 countries and an established installed base with strong roots in North America, ABB’s biggest market. GE Industrial Solutions is headquartered in Atlanta, Georgia, and has about 13,500 employees around the world. In 2016, GE Industrial Solutions had revenues of approximately $2.7 billion, with an operational EBITDA margin of approximately 8 percent1 and an operational EBITA margin of approximately 6 percent1. ABB will acquire GE Industrial Solutions for $2.6 billion; the transaction will be operationally accretive in year one. ABB expects to realize approximately $200 million of annual cost synergies in year five, which will be key in bringing GE Industrial Solutions to peer performance. As part of the transaction and overall value creation, ABB and GE have agreed to establish a long-term, strategic supply relationship for GE Industrial Solutions products and ABB products that GE sources today.

“With GE Industrial Solutions, we strengthen our Number 2 position in electrification globally and expand our access to the attractive North American market,” said ABB CEO Ulrich Spiesshofer. “Combined with the long-term strategic supply relationship with GE, this transaction creates significant value for our shareholders.”

He added: “Together with the GE Industrial Solutions team, we will execute our well-established plans in a disciplined way to bring this business as part of the global ABB family back to peer performance. With this next step of active portfolio management, we continue to shift ABB’s center of gravity, in line with our Next Level strategy, by strengthening competitiveness, mainly in the North American market, and lowering risk with an early-cycle business.”

“This combination brings together two global businesses with a broad complement of electrical protection and distribution assets,” said John Flannery, CEO of GE. “ABB values our people, domain expertise, and our ability to operate in the segments where we have depth and experience. GE will also benefit through an expanded strategic supply relationship with ABB as the two companies work together.”

GE Industrial Solutions will be integrated into ABB’s Electrification Products (EP) division, resulting in a unique global portfolio and very comprehensive offering for North American and global customers. They will benefit from ABB’s innovative technologies and the ABB AbilityTM digital offering coupled with GE Industrial Solutions’ complementary solutions and market access. Included in the acquisition is a long-term right to use the GE brand. ABB will retain the GE Industrial Solutions management team and build upon its experienced sales force. After closing, this transaction will have an initial dampening effect to EP’s operational EBITA margin. ABB commits to returning EP to its target margin corridor of 15-19 percent during 2020.

Tarak Mehta, President of ABB’s EP division, said: “This acquisition strengthens our position as partner of choice for electrification globally and in North America. We look forward to working with GE Industrial Solutions’ and ABB’s customers and channel partners to create new opportunities in this highly attractive core market for our division. We have a clear integration plan to realize the synergies of this combination and to bring our combined business back into the target margin corridor during 2020.”

ABB’s EP division delivers more than 1.5 million products to customers around the world every day through a global network of channel partners and end-customers. EP offers a comprehensive portfolio of low- and medium-voltage products and solutions for a smarter, more reliable flow of electricity from substation to socket.

Given this transaction, ABB has decided to put the previously announced share buyback program on hold.

The transaction is expected to close in H1 2018, subject to customary regulatory clearances. Credit Suisse and Dyal Co. acted as financial advisors to ABB, and Davis Polk & Wardwell provided legal counsel.

Blake Moret Finally Gets the Cherry

After a year of being CEO, the Rockwell Automation Board has finally named Blake Moret to the post of Chairman. He, of course, succeeds Keith Nosbusch in that role, as he succeeded Nosbusch as President and CEO.

Rockwell will continue to have an independent “lead director,” Donald R. Parfet, who said: “Since Blake became CEO and joined the board in July 2016, he has demonstrated that he is exceptionally well-qualified to lead the company and the board. Blake is a champion of the company’s high performance culture with an extraordinary ability to inspire and connect with customers, employees, partners and the leadership team. The board is confident that this leadership structure will continue to drive the company’s success.”

Moret has already done some interesting things, like the acquisition of Maverick Technologies.. The jury is still out on that one.

It is always interesting to watch a major company CEO finding his feet and getting going.

The Bitter and the Sweet – Siemens: 2,500 Jobs Lost, 25,000 Additional Jobs Pledged

We predicted almost a year ago that if the slump in the oil and gas industry continued, restructuring, changing focus, and diversification would be necessary to regain/maintain the fiscal health of our industry. Oil and gas shows no indication of a rebound any time soon, and Siemens is adapting and reorganizing; pulling resources away from the oil and gas and metals and mining sectors to focus instead on becoming a “digital industrial company.”

 

The Bitter

With this transition, Siemens announced in a press release dated March 9 that twenty-five hundred industrial division jobs will be slashed, approximately two thousand of which are in Germany (primarily Bavaria), but five hundred additional positions worldwide will be cut as well. “Plunging demand in raw materials markets has led to a significant intensification of competition, particularly in Asia,” said Juergen Brandes, CEO of Siemens’ Process Industries and Drives Division. “To guarantee our competitiveness, we’ve got to adapt to these conditions.”

 

The Sweet

Siemens pledged to make 25,000 new hires worldwide “in each of the coming years” for its other divisions as it dedicates itself to becoming a digital industrial company. The press release indicates that with an increase of more than €1 billion in investment in research and development, productivity and global sales, Siemens will keep the number of new hires at a continuously high level in the years ahead. In particular, the company expects to add at least 25,000 new employees worldwide each year for the next several years – around 3,000 of them in Germany.

This scenario reminds me of a scene in a Star Trek movie, The Wrath of Khan, where Spock gives his life to save the Enterprise. As he dies from radiation poisoning after saving the ship, he comments, “The need of the many outweighs the need of the few.” That comment is certainly apt here. Siemens employs over 300,000 world-wide. To keep the company healthy, some sacrifices are inevitable. Just as Spock lost his life to ensure that the Enterprise survived, in the short term some Siemens employees will loose their jobs to ensure that Siemens survives. We must accept that this is necessary for our industry as a whole to “ Live long and prosper!”

Jumping on the HollySys Bandwagon

Others are also beginning to recognize HollySys’ smart business tactics. On February 17, Stephen Simpson, CFA, noted in an article for Seeking Alpha that HollySys is executing well; posting double-digit revenue growth due to rail sales. Simpson also cautions, however, that HollySys cannot continue to low-ball rail bids if it wants to maintain fiscal stability. In this economy a company has to do what a company has to do, and from the numbers HollySys is posting, it appears to be doing what it needs to do very well.