Switzerland-headquartered ABB and Italian company FIMER have signed an agreement under which FIMER will acquire ABB’s solar inverter business. The transaction is expected to enhance the prospects of the solar inverter business and enable ABB to focus its core business portfolio on other growth markets, the company announced in a media statement.
With this, ABB expects to take an after-tax non-operational charge of approximately $430 million in the second quarter of 2019, with the half-year results of 2019 being impacted accordingly. Around 75% of this charge is represented by cash outflows ABB will pay to FIMER from the deal closing date through the year 2025.
In addition, ABB expects nearly $40 million of carve-out related separation costs starting in the second half of 2019.
In India, there are over 30 inverter suppliers meeting the demands of the rapidly growing solar market. Mercom recently reported that ABB was the top supplier of solar inverters to the Indian market for the calendar year 2018 as well as cumulatively. Even in 2017, ABB had emerged as the market leader in this segment.
This acquisition includes the solar inverter business from Power-One which was acquired by ABB’s Discrete Automation and Motion division in 2013. The business offers a comprehensive portfolio of products, systems, and services for different types of solar installations. It is currently within ABB’s electrification business and has achieved revenues of approximately $290 million in 2018.
According to ABB’s statement, both the companies will ensure a smooth transition for the customers and employees and FIMER will honor all the existing warranties and ABB will compensate FIMER for taking over its business and liabilities.
When contacted, an ABB executive refused to comment on the acquisition. However, the executive added, “We are a global firm and such decisions are made considering the global market, and not just a particular region.”
After the closing of the transaction, ABB expects the operational earnings before interest, taxes, and amortization (EBITA) margin of its electrification business to be impacted positively by slightly more than 50 basis points, supporting the business’ progress towards its target margin corridor of 15-19%.
The completion of this acquisition process is expected in the first quarter of 2020, subject to certain conditions like the completion of the carve-out and prior consultation with the employee representative bodies.
Tarak Mehta, President of ABB’s Electrification business, commented on this development saying, “The divestment is in line with our strategy of ongoing systematic portfolio management to strengthen competitiveness, focus on the quality of revenue and higher growth segments. Solar is a well-established and key focus for FIMER and as such we believe them to be a very good owner for ABB’s solar inverter business. The combination of the portfolios under FIMER will support further sales growth. Through our intelligent low- and medium-voltage offering, ABB will continue to integrate solar power into a range of smart solutions including smart buildings, energy storage, and electric vehicle charging.”
Filippo Carzaniga, Chief Executive Officer of FIMER, said, “We are glad to announce this further step in our development as FIMER’s focus on the solar business will be greatly enhanced by this integration. Our commitment to positively influence the energy market will be realized through the development of new product platforms and innovative digital technologies. We will continue the excellent job carried out by ABB in recent years, combining precious resources, knowledge, and expertise in Italy and worldwide. With a strengthened portfolio, we are better placed to shape the future of this increasingly strategic business.”
Image credit: ABB
Saumy is a senior staff reporter with MercomIndia.com covering business and energy news since 2016. Prior to Mercom, Saumy was a copy editor at Thomson Reuters. Saumy earned his Bachelors Degree in Journalism & Mass Communication from the Manipal Institute of Communication at Manipal University. More articles from Saumy Prateek.