ABB Divests Power Grids To Hitachi; To Discontinue Legacy Matrix Structure

(RTTNews) - ABB (ANN.L, ABB) announced that Hitachi (HTHIF.PK, HTHIY.PK) will acquire ABB's Power Grids business, with transaction Enterprise Value of $11 billion for 100 percent of Power Grids. The company will initially realize a levered consideration of approximately $9.1 billion from the sale of 80.1 percent of Power Grids, including pre-sale net leverage, before one-time transaction and separation related costs as well as cash tax impacts. ABB will initially retain a 19.9 percent equity stake in the joint venture. The transaction agreement includes a pre-defined option for ABB to exit the retained 19.9 percent share, exercisable three years after closing. Hitachi holds a call option over the remaining 19.9 percent share.

ABB intends to return 100 percent of the estimated net cash proceeds of $7.6-7.8 billion from the 80.1 percent sale to shareholders through share buyback or similar mechanism. ABB intends to maintain the level of dividend per share post close and aims to maintain its "single A" credit rating long term.

ABB expects approximately $200 million of charges in fourth-quarter 2018. The company expects to incur one-time non-operational transaction and separation related costs of $500-600 million. ABB anticipates $800-900 million related cash tax impact. The completion of the transaction is expected by first half of 2020.

Effective April 1, 2019, ABB will simplify its organizational structure through discontinuation of the legacy matrix structure. The corporate center will be further streamlined. ABB expects a total of $500 million annual run-rate cost reductions across the group over the medium-term. Approximately $500 million of related non-operational restructuring charges are expected to be taken over the coming two years.

ABB also presented its new medium-term group target which includes: 3-6 percent annual comparable revenue growth; operational EBITA margin of 13-16 percent; and basic EPS growth above revenue growth.

ABB said it intends to host a strategy update alongside the fourth quarter 2018 results. Also, the company amended the announced dates for fourth-quarter results to February 28, 2019.