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UPDATE 1-ABB buys GE business for $2.6 bln in bet it can boost margins

UPDATE 1-ABB buys GE business for $2.6 bln in bet it can boost margins
From Reuters - September 24, 2017

ZURICH (Reuters) - Power grids maker ABB is buying General Electrics Industrial Solutions business for $2.6 billion on a bet that it can improve lackluster margins at the unit over the next five years, the Swiss engineering company said on Monday.

Zurich-based ABB sees potential for cost synergies of $200 million annually after five years with the deal, which includes terms for long-term use of GEs brand.

In 2016, Industrial Solutions had sales of about $2.7 billion, with an operating margin of some 8 percent.

ABB is wagering on being able to cut costs and boost profitability at the Georgia-based GE business, whose operating earnings before interest, taxes and amortization (EBITA) as a percentage of sales is only about half the 15 percent of ABBs comparable Electrification Products division.

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