ABB CEO says Group Mulling Value-Creating Buys

ABB reaffirmed it is considering acquisitions and has the means to fund a takeover despite strained debt markets, Michel Demare, ABB's interim chief executive told CNBC Friday.

The Swiss engineering group would first look to make medium-sized acquisitions, but after that the group would be ready to go for something larger, Demare told "Squawk Box Europe".

"This is not the period where you want to stretch your leverage to the limit and find yourself in an operating problem in six months time," Demare cautioned, suggesting any potential deal wouldn't rely heavily on debt. "We are today sitting comfortable on quite a pile of cash," he said.

ABB is rated A- at Standard & Poor’s and Baa1 at Moodys’ Investors Service, just two notches from sub-investment grade, or "junk" status. Credit default swaps for the group trade at around 67 basis points, according to data from Markit.

This means an investor would have to pay 6,700 euros each year for five years to insure 10 million euros in ABB bonds against default. That’s around 2,600 euros cheaper than the contracts traded in early February, when former CEO Fred Kindle was ousted after what as described as "irreconcilable differences" with the ABB board – a move many analysts said was related to acquisition strategy and the best uses of the company’s nearly 6 billion euro cash reserves.

Demare was immediately named interim CEO, but the board chose former GE Heathcare boss Joseph Hogan to replace Kindle, and he’ll become the first American to head the group on September 1.

Demare also said that valuations had come down, making deals more attractive, but pointed out that falling share prices could put off potential acquisition targets from doing a deal.

"When it becomes a good time for buyers then sellers are probably not so interested," Demare said.

The group's net cash at the end of the second quarter reached $6 billion.

- Reuters contributed to this report.