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ABB CEO hails 'new era' after selling majority of its power grids unit to Hitachi

Key Points
  • The acquisition valued this unit at $11 billion and allows ABB to return the proceeds to shareholders.
  • ABB and Spiesshofer had originally decided to keep the unit after a review two years ago and recent reports suggested that the chief executive was bowing to pressure from an activist investor to sell.
  • However, Spiesshofer told CNBC's Joumanna Bercetche Monday that he had no regrets about the delay.
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ABB CEO: Focused on digital industries

ABB Chief Executive Ulrich Spiesshofer said his Swiss engineering group will now focus squarely on digital industries after selling an 80 percent stake in its power grids business to Japanese firm Hitachi on Monday.

The acquisition valued this unit at $11 billion and allows ABB to return the proceeds to shareholders. ABB and Spiesshofer had originally decided to keep the unit after a review two years ago and recent reports suggested that the chief executive was bowing to pressure from an activist investor to sell.

However, Spiesshofer told CNBC's Joumanna Bercetche Monday that he had no regrets about the delay.

"It was the right decision, as you can see in the valuation, to hang onto it. Over the last couple of years we have strengthened the business, we have brought it back to good profitability, to market leading profitability," he said.

Hitachi is set to become one of the largest players in the power grids industry and ABB will now look to focus on other areas of its business, such as automation and industrial robots.

ABB Chief Executive Ulrich Spiesshofer.
Photo: ABB

"This is truly the new era for ABB," Spiesshofer added, saying the $11 billion valuation on Monday compares to an estimate that was only half that a few years ago.

Proceeds of the $7.6 billion to $7.8 billion from the deal will be returned to shareholders via buybacks, with Spiesshofer insisting that the company was also investing in new technologies.

Swedish activist investor Cevian, which owns 5.34 percent of ABB, was reportedly pushing for the deal with co-founder Lars Forberg saying Monday he was convinced the sale was the right way forward.

"Focusing ABB's portfolio on digital industries and further simplifying the business creates a better company and a strong basis for long-term growth," he said, according to Reuters. Shares of ABB were flat in midday trade Monday but opened the session nearly 2.5 percent higher.

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