ABB rejects shareholder calls to spin off Power Grids

Tue Oct 4, 2016 9:39am EDT
 
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By John Revill

ZURICH (Reuters) - ABB (ABBN.S: Quote) will keep its Power Grids business in a rejection of demands from an activist investor to spin it off and the Swiss engineering group has also unveiled plans for a $3 billion share buy back from next year.

The Zurich-based company's long-awaited decision disappointed Cevian Capital, ABB's second biggest shareholder, which had wanted Power Grids to become a separate entity. Investor AB, ABB's largest shareholder, backed the decision to hold on to it.

ABB said on Tuesday it had made this choice to take advantage of trends like smart grids and linking renewable energy production to consumers and that this was a better option than selling, floating, or spinning off the business.

Cevian Capital, which has a 6.2 percent stake in ABB, was disappointed.

"ABB is a collection of top-quality businesses whose performance has been hindered for many years by the company's conglomerate structure," Christer Gardell, Cevian's Managing Partner & co-founder, said.

Cevian said separating ABB and Power Grids, which makes parts for offshore wind turbines, could create two companies with combined share price of 35 Swiss francs ($35.80).

"The board has decided to keep the conglomerate structure. We think this is an unfortunate decision. The board and management team will be held accountable for realising 35 francs," Gardell said.

ABB's shares, which despite a recovery in 2016, have lagged rivals like General Electric (GE.N: Quote), Siemens (SIEGn.DE: Quote) and Legrand (LEGD.PA: Quote) over the past five years.   Continued...

 
The logo of Swiss engineering group ABB is seen at a plant in Zurich, Switzerland October 4, 2016. REUTERS/Arnd Wiegmann