ABB, the international power and technology company that employs hundreds in the Triangle, says it will keep its Power Grids business unit rather than spin it off.
That group has a huge presence in Raleigh, including a center of excellence for smart grids.
The company had faced pressure from investors to consider selling off the business.
ABB employs some 500 people in its local Power Grids group that is based at N.C. State’s Centennial Campus, a company spokesperson tells WRAL TechWire.
The Smart Grid Center of Excellence also is located there. ABB picked NCSU for the lab in 2010.
In a series of announcements made Tuesday at its Zurich, Switzerland headquarters in Europe, ABB outlined a reorganization and other initiatives designed to grow revenues while also cutting costs. (ABB spelled out details of its for units moving forward as “entrepreneurial divisions.”)
“In our strategic portfolio review we have listened carefully to all stakeholders and all expressed views. After a very thorough and detailed process, supported by leading advisors, we have concluded that the continued transformation of Power Grids under ABB’s ownership creates the highest value for our shareholders and customers,” said ABB CEO Ulrich Spiesshofer.
“Building on the transformation success and momentum to date, the Power Grids division is ideally positioned within ABB to drive long-term, profitable growth during the Energy and Fourth Industrial Revolutions and is an integral part of our offering.”
The backstory
There had been speculation ABB could spin off the Power Grids group as a separate company.
“Following a comprehensive strategic portfolio review, the Board and Executive Committee of ABB have concluded that the transformation of Power Grids under ABB ownership will unlock maximum shareholder value compared to other ownership options such as sale, IPO, spin-off or joint venture,” ABB said.
“Key factors in the decision-making process included market attractiveness, the existing and future product offerings, business model opportunities and best ownership, as well as all alternative value creation options for ABB shareholders.”
ABB said the decision was made after a review of “independent” analysis provided separately by Goldman Sachs and Credit Suisse.
ABB’s Americas Region headquarters is located in Cary. Some 300 people work there.
An ABB manufacturing facility in Pinetops employs another 340. In all, ABB has some 2,000 workers across the state which is 10 percent of its U.S.-based work force. Globally, the company has 135,000 employees.
What follows is ABB’s explanation of the Power Grids decision:
ABB Power Grids
Power Grids will be the partner of choice for stronger, smarter and greener grids.
Following a comprehensive strategic portfolio review, the Board and Executive Committee of ABB have concluded that the transformation of Power Grids under ABB ownership will unlock maximum shareholder value compared to other ownership options such as sale, IPO, spin-off or joint venture.
Key factors in the decision-making process included market attractiveness, the existing and future product offerings, business model opportunities and best ownership, as well as all alternative value creation options for ABB shareholders. This review included independent analyses from McKinsey and independent financial advice from Goldman Sachs and Credit Suisse.
The division, which is #1 globally, will take advantage of the Energy and Fourth Industrial Revolutions. These are creating significant demand for Power Grids’ products, systems, software and services, and support the portfolio shift towards digitalization.
To realize the full potential of the division and continue the ongoing transformation, “Power Up,” a massive program covering key aspects of the business, was introduced today. It will drive growth and enhance earnings accretion by focusing on core operational strengths and high growth segments as well as digitally enabled services and software.
A key element of the division’s ongoing transformation is the de-risking of the business model and tapping of growth opportunities through two strategic partnerships announced today – with Fluor for large electrical substations, and Aibel for offshore wind connections. Both partnerships combine ABB’s market leadership in power technologies with the respective partner’s expertise – Fluor’s in managing large engineering, procurement and construction (EPC) projects, and Aibel’s in offshore wind projects.
Another key element is ABB’s pruning of niche non-core businesses such as the recently announced sale of ABB’s cable business to NKT cables while preserving access to technology through a strategic partnership.
As a consequence of the transformation, ABB is raising the operational EBITA margin target corridor for the division from 8-12% to 10-14%, effective 2018.
“In our strategic portfolio review we have listened carefully to all stakeholders and all expressed views. After a very thorough and detailed process, supported by leading advisors, we have concluded that the continued transformation of Power Grids under ABB’s ownership creates the highest value for our shareholders and customers. Building on the transformation success and momentum to date, the Power Grids division is ideally positioned within ABB to drive long-term, profitable growth during the Energy and Fourth Industrial Revolutions and is an integral part of our offering,” Spiesshofer said.
Source: ABB
