ABB Expands Automation Offering in $5.5 Billion Rotork Deal
(Bloomberg) — ABB Ltd. agreed to buy British industrial components company Rotork Plc for an enterprise value of around $5.5 billion to expand its electrification and automation businesses.
Under the terms of the deal, the biggest acquisition in ABB’s history, Rotork shareholders will get £5.03 in cash per Rotork share, a premium of around 60% on its latest three-month average share price, the Swiss industrial company said Thursday. It also signaled it has deep pockets for more purchases.
Chief Executive Officer Morten Wierod has moved to streamline ABB’s portfolio since taking over nearly two years ago to tap into burgeoning investment in the data centers underpinning the artificial-intelligence boom.
The Zurich-based manufacturer, which makes the transformers that enable power grids to feed the centers’ substantial energy needs, last year sold its robotics division to SoftBank Group Corp. for more than $5 billion in a move designed to help it focus on targeted acquisitions.
Its push into industrial AI and automation has been a major driver for its shares, which were up by more than 75% on the year through Wednesday’s close. They were down about 2% in early trading in Zurich, while Rotork shares surged by as much as 67% to a record £4.85, their biggest-ever intraday gain.
Wierod said ABB has a pot of $13 billion available for additional purchases, telling Bloomberg Television the company is “in a very strong position with a strong balance sheet.”
“When we want to do M&A we can do,” he added. “We’re taking a wide view and are looking at every area.”
Rivals like Germany’s Siemens AG and Schneider Electric SE of France have also benefited from the spurt in AI-related demand and have been active as well in dealmaking.
Schneider agreed this month to buy Cognite in a $3.1 billion all-cash deal to expand its industrial data and AI software operations, part of an accelerating push to modernize Europe’s factories.
RBC analyst Mark Fielding said the Rotork purchase makes sense for ABB and includes “an attractive premium.” However, the fact that the British firm is “a niche asset” means there could be a counter bid from among “the larger process-equipment companies,” Fielding said in a note.
Having already raised its revenue outlook for the year in April, ABB did so again on Thursday, predicting low double-digit to low-teens growth, up from high single-digit to low double-digit expansion.
ABB also reported second-quarter orders that surpassed expectations, jumping by 30% compared with the same period a year earlier to $12 billion. That comfortably beat the $10.5 billion average analyst estimate.
“When we talk with customers, the pipeline is very strong so the outlook in this sector for the next quarters and years is very strong,” Wierod told Bloomberg TV, referring to ABB’s electrification business. “And we are well positioned to capture that.”
Bath, England-based Rotork makes equipment that controls the movement of liquids and gases through industrial pipelines and plants. It has significant exposure to energy, water infrastructure and utilities.
ABB had already announced Wednesday that it bought French company Advantics, adding high-efficiency silicon carbide power-conversion technology to its portfolio. It didn’t publish financial details.
The purchase reinforces its position across the AI power chain, according to Bloomberg Intelligence, which expects ABB’s data-center revenue to rise to about €9.9 billion ($11.4 billion) by 2030 from €3.0 billion last year.
“Schneider and Vertiv should retain leadership, but ABB looks well placed to narrow the gap as AI data centers shift toward higher-value power architectures,” Omid Vaziri, a senior BI industry analyst, said in a note.
Barclays acted as ABB’s sole financial adviser and Freshfields as legal adviser.
–With assistance from Oliver Crook.
(Updates with shares, analyst comment starting in seventh paragraph.)
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