The Indian arm of ABB Ltd. (www.abb.co.in), the global power automation major, has announced that it is acquiring the operating business of ABS Global Industries and Services Ltd. (ABBGISL) for US$89 million.
ABS makes transformer insulation boards and low voltage switches. The businesses to be acquired are Transformer Insulation-Boards and Components, Low Voltage Breakers and Switches and Vacuum Interrupters, which together are expected to generate revenue of approximately $55 million on a full-year basis.
The board of directors of ABB Ltd. has already approved the acquisition of the operating businesses of ABBGISL as a going concern on a slump sale basis, the company said in a filing with the Bombay Stock Exchange (BSE). “This acquisition of operating business of ABBGISL ASB Ltd. has been made to have business synergies,” the company said in its filing. The acquisition will take effect on April 1, it added.
Acquired, not merged
Market observers say that this acquisition signals ABB’s intention for control. While this is an intra-group deal that can be seen as a consolidation move by ABB in its Indian operations, what is notable is the mode of transaction. ABB is acquiring the business as a slump sale on a going concern basis instead of merging the company, which would have required the Indian listed company to issue fresh shares to the Swiss-Swedish parent.
This is the second acquisition within about six months by ABB India, in an effort to come out of a bad patch in its Indian operations. The company, during September 2010, acquired Bangalore-based Metsys Engineering and Consultancy, which is one of the key technical solution providers to the steel industry in India and other emerging market countries. Metsys employees and research and development (R&D) capabilities will be integrated into ABB’s Process Automation division.
ABB India Managing Director Bazmi Husain has recently indicated that the company will be constantly looking at acquisitions to improve the range of offerings in India. The company, during the past year, has been facing intense competition in the Indian market from Chinese and Korean vendors even as it started to pull back from the rural electrification business, which is taking a heavy toll. The company has stated that a majority of the moves to put Indian operations back on the growth path have been taken, and that “things will improve during 2011”.
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