ABB Expands Automation Offering in $5.5 Billion Rotork Deal

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.

(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. The deal, the biggest acquisition in ABB’s history, includes a premium of around 60% to Rotork’s latest three-month average share price, the Swiss industrial company said Thursday. Since taking over nearly two years ago, Chief Executive Officer Morten Wierod has streamlined ABB’s portfolio to tap into burgeoning investment in the data centers underpinning the artificial-intelligence boom.

The Zurich-based company, 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 have risen more than 75% over the past year, alongside rivals like Germany’s Siemens AG and Schneider Electric SE of France. Wierod said ABB has a pot of $13 billion available for additional acquisitions, telling Bloomberg TV 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.” 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.

The transaction is expected to close in the first half of next year, subject to Rotork shareholder and regulatory approvals. Rotork is expected to add 3% to ABB’s revenues and immediately contribute to margins, according to the statement. ABB’s previously biggest purchases include Thomas & Betts in 2012 for $3.9 billion and Baldor Electric Company in 2011 for $4.2 billion.

Barclays acted as ABB’s sole financial adviser and Freshfields as legal adviser. —With assistance from Oliver Crook. (Updates with CEO comments starting in sixth paragraph.)