Hitachi to Buy Major Stake in ABB's Power Grid BusinessDavid Wagman | December 18, 2018
Hitachi said it will acquire an 80.1% stake in the ABB Power Grids business from ABB.
The Japan-based company said it expects to close the $6.4 billion acquisition in the first half of 2020, making Power Grids a consolidated subsidiary. Hitachi has an option to buy the remaining 19.9% stake in Power Grids at a future date.
The acquisition is expected to position Hitachi to offer digital grid solutions and digital technology to a global market. In addition, Hitachi said that it aims to build an energy platform to connect sectors such as mobility, smart buildings and cities, and industry and to promote more efficient use of electricity through its Social Innovation Business.
ABB said that the sale is part of its plan to realign its business structure in April 2019. The Swiss-based company said it will focus on four sectors: electrification, industrial automation, robotics & discrete automation, and motion, which includes motors and drives.
Hitachi said the power grids market is forecast to reach more than $100 billion by 2020, and provide an annual growth rate of 4% or above. In particular, advanced energy management systems using digital technologies are growing rapidly as are innovations in grid systems for next-generation transmission networks.
ABB's power grids business operates four segments. "Grid Automation" provides protection control system and remote monitoring control systems to enable grid network stabilization, and management systems for supply and demand electricity market for trading electricity. "Grid Integration" includes digital substation, system integration and service solutions, high-voltage DC systems and power semiconductors. "High Voltage Products" includes gas-insulated switchgear. "Transformers" includes power, distribution and transaction transformers for railways.
ABB power grids' revenues totaled $10 billion in 2017, and operational EBITA was around $1 billion. The division has some 100 manufacturing sites, around 200 sales locations, and 36,000 employees globally.
In December 2014, Hitachi entered into a strategic partnership agreement with ABB and formed a joint venture for HVDC operations in the Japanese market. Together, the companies have offered products to reform the power systems for domestic electric power companies.