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ABB Oil, Gas and Petrochemicals sale "close"

ABB is increasingly focussing on core business, such as its power technology and industrial IT units. ABB

The troubled engineering giant, ABB, is said to be close to clinching a deal for the sale of its Oil, Gas and Petrochemicals (OGP) division.

This content was published on August 18, 2003 - 15:22

Shares in ABB rose on Monday amid media reports that the crucial sale would help raise around $1 billion (SFr1.38 billion) for debt reduction.

Sources close to the deal told the Reuters news agency on Friday that a consortium of buyers could sign off on the sale this week.

They include JP Morgan Partners and the British firms, 3i Group and Candover.

The sale of OGP is seen as a vital step in ABB’s efforts to ease its massive debt burden and trigger a turnaround following two years of billion dollar losses.

CEO Jürgen Dormann has promised creditor banks that ABB would reduce its debt by $2 billion to $6.5 billion this year.

The maker of industrial robots and power transmission systems almost collapsed last year after aggressively expanding during the 1990s.

Surging stock

The OGP sale became entangled in a long-running asbestos case in the United States involving one of ABB’s subsidiaries, Combustion Engineering (CE).

ABB earlier this month won court approval for a $1.2 billion settlement to CE asbestos victims, which caps further potentially ruinous claims against divisions such as OGP.

Shares in the company have risen by around 60 per cent in less than a month.

The Wall Street Journal has reported “people familiar with the situation” saying that a deal was “close”.

A question of price

ABB first announced plans to sell OGP late last year, with an estimated price tag of $1.4 billion.

Sources said the proposed $1 billion sale price reflects the fact that not all of OGP's assets will be included in the sale.

The sale may not include OGP’s Lummus business, which contracts oil, gas and petrochemical work.

Several other bidders, including General Electric and the US oil-services firm, Cooper Cameron, have reportedly shown interest in the OGP sale.

ABB has declined to comment on the possible sale.

swissinfo with agencies

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