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ABB Group sells its family silver: Swiss factory could win new owners
The trend towards the dissolution of an industrial icon: Baden AG’s turbocharger factory could go public as a separate company.
Aargau’s economic director, Urs Hofmann (right), visited the turbocharger factory in 1999 with representatives of the city of Baden.
The restructuring of the ABB Group under the new boss Björn Rosengren is accelerating. At a virtual conference for investors on Thursday, the manager announced the sale or spin-off of three of the 18 and now 20 operating units (divisions).
The turbocharger factory in Baden AG is part of one of these three businesses to be sold. According to the official version, “all options” are still being examined for this. However, Rosengren told the investor conference that a spin-off with subsequent listing on the Swiss stock exchange was being considered for the turbocharger division.
Swiss technology in maritime ships
The division has around 2,800 employees in 50 countries, more than 800 of them in Baden. In 2019, it generated annual sales of about $ 800 million, or about 12 percent from the Industrial Automation division (new: process automation). Most turbochargers are used on ocean ships, where they increase the efficiency of diesel engines by compressing exhaust gases.
The company has been under the management of Oliver Riemenschneider, 58, for nine years. The German-Swiss dual national is an ABB veteran and has been with the group since 1991. Since September he is also chairman of the board of directors of the appliance manufacturer V-Zug, which parted ways with Metall Zug in the summer and now also It is listed on the Swiss stock exchange.
More spin-offs in the telecommunications sector
ABB also plans to sell its business in clutches, gearboxes and other products for mechanical power transmission. ABB approached this business in 2010 as part of the acquisition of electric motor manufacturer Baldor in the US In 2019, it generated $ 575 million, or about 9 percent of the Drive Technology division.
Finally, also in the US, the business of power converters for the telecommunications industry is put up for sale. That’s about 375 million francs in sales or three percent of the electrification division’s revenue. ABB only took over this business in 2018 by acquiring part of General Electric.
All three divisions obtain higher returns than the group as a whole
Rosengren described the three divisions that will be sold as “premium” businesses. They generated higher returns than the group as a whole and had excellent positions in the market. But ABB is no longer the best owner for these companies, the 61-year-old CEO admitted. By this he means that ABB no longer wants to invest its limited capital resources there, but elsewhere.
ABB wants to grow with the digitization of the industry and increasingly sell its customers services that have to do with networking new and existing ABB systems. However, ABB does not want to dare to make large acquisitions of industrial software companies, such as those made by major competitors such as France’s Schneider (Aveva) or Germany’s Siemens (Mentor Graphics) in recent years with a multi-million dollar investment. He does not believe in the success of such large acquisitions, Rosengren said.
Higher dividends are Rosengren’s second top priority
Furthermore, the Swede said that ABB plans to invest less in the near future anyway. The group must first achieve stability and improve profitability and only then can it return to the growth map. In terms of performance, about half of the corporate divisions are below the parameters specified by headquarters. A sustained increase in the dividend also ranks second on Rosengren’s priority list. At the top is organic growth, that is, the growth of our own resources without acquisitions.
The group intends to continue providing funding for this in the future. The expected proceeds from the sale of the three corporate divisions (according to initial analysts’ estimates up to $ 4 billion) should not simply be distributed to shareholders, as is the case with the nearly $ 8 billion that ABB currently raises. from the sale of the power transmission division to Hitachi. resolved. Even five or 10 small acquisitions per year will be possible one day after the stabilization phase is over, Rosengren promised.
This concession was also apparently necessary, because many investors scoffed Thursday that ABB only expects annual sales increases of three to a maximum of five percent in the next few years. So far, the expectation has been three to six percent. And even to achieve the lowest forecast, a third of acquisitions will need to be made in the future. The share price fell more than two percent on Thursday to less than 25 francs.
