Power electronics giant Hitachi has acquired ABB’s power grids business in an US$11 billion (£8.7 billion) deal which cements its position in the energy solutions sector.
Hitachi is to acquire an 80.1% stake in the power grids division and has also entered into a purchase option for the remaining 19.9% share, turning power grids into a wholly-owned subsidiary of Hitachi.
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Hitachi and ABB have agreed to a deal which values the power grids business at around US$11 billion (£8.7 billion). Hitachi will pay a purchase price of US$6.4 billion (£5 billion) for the initial 80.1% after deducting debt-like items from the unit’s value.
The final purchase price will be based on customer adjustments for net working capital and net debt based on the closing date, which has been tentatively slated for H1 2020.
Hitachi said the transaction would allow it to combine ABB’s grid-level technology with Hitachi’s digital platform and look to expand Hitachi’s reach through ABB’s customer base.
Furthermore, Hitachi is aiming to expand its reach into adjoining markets such as emobility and C&I energy.
Hitachi pointed to internal analysis that placed the global power grids market as having the potential to be valued at US$100 billion by 2020, with growth predominantly driven by the transition towards renewable energy and significant electrification.
Toshiaki Higashihara, president and chief executive at Hitachi, described the deal as a “significant turning point” for global energy and power markets at a time when digital technology is “fundamentally changing” energy demand and supply.
“Hitachi will combine ABB's strengths in the power grids business with our digital technology to build an energy platform that contributes to innovating the energy business. This creates further innovation for business fields such as life and industry and helps us address society's issues and improve quality of life,” he said.
Meanwhile Ulrich Spiesshofer, chief executive at ABB, said the combination of the power grids business with Hitachi stood to make for a “globally leading infrastructure business”.
“ABB’s power grids business will strengthen Hitachi as global leader in energy infrastructure and Hitachi will strengthen the position of ABB’s power grids business as a global leader,” he added.