ABB, The Swiss Engineering Giant, Announces Investment Bid Of £860 Million To Acquire Chloride Group

From: investinuk
Published: Thu Jun 10 2010

ABB, a Swiss Engineering company and the world’s biggest maker of power grids, announced that it plans to buy Chloride Group, UK's largest supplier of secure power systems to hospitals and other public buildings, in an investment deal worth £860 million in its bid to enhance the quality of its automation services.

As at the announcement, Chloride shares went up by 18% to trade above the 325 pence offer price, pointing to the fact that investors were expectant that Emerson Electric would launch a counter bid. Last month, Chloride turned down an offer for £723 million from Emerson Electronic, which said it would be making a statement on the Chloride-ABB deal at an unspecified date. ABB shares went up by 0.88% at 19.39 francs per share when compared to a 0.59% rise in the STOXX 600 industrial goods sector index.

According to analysts, the deal is strategically sensible as, firstly, it augers well with the company’s customer base and is expected to bring new opportunities for an increase in new clients for the company. Even though the price was somewhat expensive according to the analysts, it might have been due to the rejection of the Emerson bid by the company. That, however, would not be the end as there appears to be a bidding war and companies such as Schneider and Emerson might propose further offers.

It was expected that Emerson would push on with another offer for the Chloride Group but as it is, analysts believe the deal has reached a size that is probably beyond what the US based Emerson Group could offer. ABB competes with Schneider, a French group and is mainly involved in the selling of equipment to utilities and oil & gas companies. The Swiss group had $7.1 billion in cash as at the end of the first quarter with an expected investment spending spree. With this acquisition, Chloride will become part of the company’s tactful automation division after the company overhauled its automation division and begun suspicion that it was about to start seeking acquisitions and investments.

Chloride currently employs 2,500 individuals and had revenue of £336 million in its financial year ended March. Even so, the acquisition will still be subject to approval by Chloride shareholders, the high court in the UK and other regulatory bodies. Other than this investment in the Chloride Group, ABB had, in early May, purchased US based Software group, Ventyx. Two weeks later it also announced that it was increasing its stake in its Indian subsidiary with $965 million.
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