Hitachi, Ltd. (TSE:6501) signed an agreement to acquire 80.1% stake in Power Grids business of ABB Ltd (SWX:ABBN) for $9.4 billion on December 17, 2018. In a related transaction, Hitachi entered into a purchase option to acquire the remaining 19.9% stake in Power Grids Business of ABB. As per terms, the agreed enterprise value of the acquired business is $11 billion. The purchase price of 80.1% stake is approximately $6.4 billion after deducting debt like items from the enterprise value. The final purchase price will be determined after customary adjustments for net working capital and net debt based on the actual amounts based at the closing date. The acquisition will be funded through cash on hand and borrowings. For the year ending 2017, Power Grids business of ABB reported total assets of approximately $8.4 billion, total revenues of approximately $10 billion, income from operation of approximately $880 million and EBITA of approximately $1 billion. The business has implied 11.2x enterprise value to operational EBITA multiple. At closing, business unit will become operating subsidiary of Hitachi and will be headquartered in Switzerland. Hitachi will retain the management team. With the announced divestment of Power Grids to Hitachi, Claudio Facchin will continue to lead Power Grids as a standalone business ahead of the closing of the transaction. Frank Duggan and Chunyuan Gu will step down from their roles as Presidents of the Europe and AMEA (Asia, Middle East and Africa) regions respectively, as those roles are to be discontinued under the new ABB operating system. Duggan and Gu will continue as advisors and in addition, Duggan will be appointed a member of the Hitachi ABB Power Grids board, representing ABB, while Gu will continue as Chairman of the Board of Directors of ABB China.

The deal is subject to antitrust approval and expected to close in the first half of 2020. The deal is expected to be completed at the end of the second quarter 2020. As of April 7, 2020, Competition Commission of India has approved the transaction. As of May 29, 2020, the European Commission approved the transaction. The cash proceeds from this deal will be returned to ABB's shareholders through a buyback program or similar mechanism. Hitachi has been assisted by UBS Securities Japan Co., Ltd. as lead financial advisor and Goldman Sachs Japan Co., Ltd. as financial advisor. Credit Suisse Group AG and Dyal Co. LLC acted as financial advisers while Stephen Hewes, Nina Janic and Piers Prichard Jones of Freshfields Bruckhaus Deringer LLP were legal advisers to ABB. The advisory fee for the transaction is approximately ¥10 billion ($88.2 million). Claude Lambert, Andreas Müller, Maria Braun, Reto Heuberger, Stefan Oesterhelt, Jürg Frick, Eduard De Zordi, Richard Stäuber, Balz Gross, Gregor Bühler and Luca Dal Molin of Homburger AG acted as legal advisor to ABB Ltd. Mitsubishi UFJ Morgan Stanley Securities acted as fairness opinion provider to ABB Ltd. Ingrid Vandenborre, Stephane Dionnet, Andrew Foster and David Wales of Skadden acted as legal advisor to ABB Ltd. David Allen, Kathy Honeywood, Adriana Carolina Combatt, Jannan Crozier, Stefanía Olmos and Juan F. Vera Cardona of Baker & McKenzie LLP acted as legal advisors for Hitachi. Eduardo H. Paoliello Jr., Jorge N.F. Lopes Jr., Cauê Rezende Myanaki, Gabriela Conca and Luiza Baltazar Scotini of Pinheiro Neto Advogados acted as legal advisors for ABB. Ernst & Young GmbH acted as financial advisor to ABB Asea Brown Boveri Ltd. Arunima Chatterjee and Aakarsh Narula of AZB & Partners acted as legal advisor of Hitachi. David Dawborn, Santi Darmawan and Santi Darmawan of Hiswara Bunjamin & Tandjung acted as legal advisor to ABB Ltd.

Hitachi, Ltd. (TSE:6501) completed the acquisition of 80.1% stake in Power Grids business of ABB Ltd (SWX:ABBN) on July 1, 2020. ABB has a pre-defined option to exit the retained 19.9% shareholding three years after closing of this transaction. As a result of the transaction, Power Grids Business of ABB Ltd will operate as Hitachi ABB Power Grids AG.