ABB to acquire all shares in Elsag Bailey, and aims to boost automation business growth

Assembly Automation

ISSN: 0144-5154

Article publication date: 1 March 1999



(1999), "ABB to acquire all shares in Elsag Bailey, and aims to boost automation business growth", Assembly Automation, Vol. 19 No. 1.



Emerald Group Publishing Limited

Copyright © 1999, MCB UP Limited

ABB to acquire all shares in Elsag Bailey, and aims to boost automation business growth

ABB to acquire all shares in Elsag Bailey, and aims to boost automation business growth

ABB, the international engineering and technology group, has announced that it has entered into agreements to acquire Elsag Bailey Process Automation NV, one of the world's leading process automation groups, in a move to expand into new growth markets and strengthen key technologies.

Under the terms of the agreements, signed with Elsag Bailey Process Automation NV and its majority owner, Finmeccanica SpA, ABB will make a public tender offer in cash for all of Elsag Bailey's outstanding common shares for US$39.30 per share, and for all of its outstanding trust originated preferred securities (TOPrS) for US$61.21 per TOPrS. The acquisition, valued on a fully diluted basis at approximately US$2.1 billion, including debt of about US$600 million, will make ABB a leading player in the global automation market.

The agreement calls for Finmeccanica, the Italian state-owned industrial group, to sell to ABB all issued common shares and TOPrS that it holds in Elsag Bailey. Finmeccanica owns approximately 53 per cent of the outstanding equity of Elsag Bailey on a fully diluted basis.

ABB president and CEO, Göran Lindahl, said the acquisition "confirms our commitment to quickly achieving our strategic growth objectives. We have targeted the automation segment as a growth business and Elsag Bailey clearly complements our automation activities in its geographic scope, customer base, and technology. Combining the businesses also holds significant synergy potential, which we expect to amount to some US$200 million a year on an operating earnings level in three to four years after the acquisition is completed."

Göran Lindahl said the process automation market is expected to show average growth of about 5-6 per cent a year over a business cycle. Current growth in this market is estimated to be around 2-3 per cent, he added.

Vincenzo Cannatelli, Elsag Bailey managing director and chief executive officer, said ABB was a good match for Elsag Bailey and will provide new economies of scale and scope to allow continued growth. "We are proud to have gained the commitment to partnership of a quality industry leader such as ABB. We have worked hard to position Elsag Bailey as a 'one-stop-shop' producer of automation technologies", he said. "We have assembled a powerful portfolio of world-class technologies, geographic presence, dedicated employees, and satisfied customers, and we think ABB is the right partner to drive this development even further."

Göran Lindahl said the acquisition will place ABB among the top suppliers worldwide in process control systems, analytics, and instrumentation. Elsag Bailey will also strengthen ABB's presence in the key automation markets of the USA, Germany, Japan, Italy and France, he said. Owing to substantially higher volumes, ABB and Elsag Bailey will enjoy greater efficiencies by combining resources in areas such as product development, manufacturing, service, and sales and distribution to serve a larger number of customers.

In 1997, Elsag Bailey ­ whose shares are traded on the New York Stock Exchange (EBY) reported revenues of about US$1.5 billion and net income of US$36 million (before charges). The company, with headquarters in Amsterdam, The Netherlands, operates some 40 manufacturing units employing about 11,000 people in more than 30 countries.

The acquisition has been approved by Finmeccanica's board of directors, and the supervisory board, as well as the board of management of Elsag Bailey have unanimously recommended the proposed offer as fair and in the best interests of Elsag Bailey's shareholders.

Elsag Bailey Process Automation NV headquartered in The Netherlands, is a leading provider of automation systems, process instrumentation, analytical measurement products, and professional services. The company's technologies are sold worldwide for the automation of various processes in the electrical power, chemical and pharmaceutical, oil and gas, pulp and paper, metals and mining, food and beverage and other industries. Elsag Bailey recorded revenues of US$1.5 billion during 1997.

ABB's global automation business segment reported orders in 1997 on a pro forma basis of US$7.8 billion and employed 42,500 people worldwide. The ABB Group employs approximately 220,000 people with orders in 1997 of about US$35 billion.

For further information contact: Asea Brown Boveri Limited, Orion House, 5 Upper St Martin's Lane, London WC2H 9EA. Tel: +44 (0) 171 753 2000; Fax: +44 (0) 171 753 0204.

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