Japan’s Hitachi is currently in advanced negotiations to acquire the power grid business of Swiss engineering giant ABB, in a deal potentially valued at up to $7.05 billion. The move signifies a significant development in the global energy sector.

Final stages

According to sources, Hitachi is in the “final stage of talks” to purchase this ABB unit for an estimated sum of 800 billion yen, as reported by the Nikkei business daily and Jiji Press. At its board meeting held on Wednesday, Hitachi officially confirmed its intention to proceed with the acquisition. It is anticipated that the two companies will finalize the agreement as early as this week, subject to the necessary approvals and regulatory processes.

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In discussions

Both Hitachi and ABB have been reticent about providing detailed comments at this stage. A Hitachi spokesperson declined to elaborate, while ABB issued a statement indicating that they are “in discussions with Hitachi to expand and re-define the existing strategic power grid partnership between the two companies.” ABB also emphasized that no assurance could be given regarding the completion of any transaction, including the timing, structure, or terms.

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Power transmission

The power grid unit owned by ABB is engaged in the manufacturing and operation of critical infrastructure, including power transmission equipment and control systems, across various countries. In 2014, Hitachi and ABB initially collaborated on plans to establish a joint venture aimed at marketing power transmission equipment in the Japanese market.

Nikkei further reported that Hitachi’s strategy involves initially acquiring a stake of approximately 50 percent in the power grid unit, with the objective of converting it into a wholly-owned subsidiary over the coming years. If this deal proceeds as outlined, it would position Hitachi as the world’s second-largest heavy electrical equipment manufacturer by revenue, trailing only General Electric in this regard.

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This potential acquisition showcases the global consolidation trends within the energy and engineering sectors, with the proposed transaction underlining Hitachi’s ambition to expand its footprint and capabilities in the power grid industry.

It also underscores the ongoing transformation and realignment of major players in the global energy landscape, as they adapt to changing market dynamics and technological advancements.