ABB says it will retain the right to use GE's brand over the long term, and expects synergies of about $200 million per year after five years. The deal is set to boost ABB's presence in its crucial North American market. ABB's portfolio includes similar products.
As part of the transaction, 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. (GE), expanding its reach in North America with a deal whose success hinges on cutting costs and improving margins at the underperforming unit.
ABB said it would finance the deal - likely its last for some time - with cash and did not need to raise equity capital.
"The key rationale of the integration is, first we will make this business better".
Ulrich Spiesshofer, chief executive at ABB, said the move strengthened the firm's number two position in the global electrification market and would create "significant value" for its shareholders. In 2016, Industrial Solutions had sales of about $2.7 billion, with an operating margin of some 8 percent.
The purchase adds to the more than 470 acquisitions already agreed by European buyers for U.S. businesses so far this year - the busiest year-to-date for such deals since 2008, according to analysis of data from Dealogic. Spiesshofer said he agreed to the transaction only after striking a supply partnership where ABB and GE will increase buying and selling from each another.
Atlanta, Georgia-based GE Industrial Solutions makes circuit breaks, switchboard panels and other electrical grid hardware used by industry and residential clients.
Activist investor Nelson Peltz's Trian Fund Management has been pressuring GE to continue to sell off its low-margin businesses and concentrate on better performing units.
GE had resumed negotiations to sell the business to ABB after moderating its price expectations, people familiar with the matter told Reuters in August.