×

ABB chief says he is ‘very confident’ about rebuilding GE business bought for $2.6 billion

  • Swiss power grid maker ABB will pay $2.6 billion for General Electric's Industrial Solutions business.
  • The unit had sales of $2.7 billion in 2016, but its EBITDA is just 6 percent of sales.
  • Chief executive Ulrich Spiesshofer told CNBC he is "very confident" that ABB can build the unit back to a strong position.

Swiss power grid maker ABB will pay $2.6 billion for General Electric's Industrial Solutions business, it was announced Monday.

Chief executive Ulrich Spiesshofer told CNBC he is "very confident" that ABB can build the unit back to a strong position.

Spiesshofer said the unit, which has an EBITDA margin of only 6 percent, has strong roots and brand legacy, but the problem is it was a non-core business in GE's portfolio.

"You know what happens to non-core businesses. They don't get enough oxygen and they don't prosper. For us, this business is absolutely right in the sweet-spot," he told CNBC's Squawk Box. "We are very confident that, jointly with the GE Industrial Solutions team, we will shape this business back to a strong position."

GE's Industrial Solutions business makes circuit breakers, switchgear, components for lighting control and power supply equipment, which overlaps with ABB's portfolio. The unit had sales of $2.7 billion in 2016, but its operating earnings before interest, taxes and amortization are just 6 percent of sales, compared to ABB's 15 percent operating margin.

Spiesshofer said he had received many calls from customers to congratulate him on the acquisition and saying ABB is the right home for the business. He also addressed how ABB will boost profit margins at the unit.

"We need to live up to that now and the way we will do it is harmonize the product and technology portfolio. We have leading edge solutions on the digital side," he said.

"Secondly, we have an overlapping footprint and we will do some restructuring in this context, but we will do this in a responsible way like ABB always does it and we will try to find a home for the very good people at GE in the growing parts of our business."

ABB expects $200 million of annual cost benefits from the acquisition deal and anticipates $400 million of integration costs.

The Zurich-based company's stock price rose 0.42 percent on news of the deal.

Reuters contributed to this report.