ABB clinches Oil Gas Petrochemicals sale
The heavily indebted Swiss-Swedish engineering firm, ABB, has finalised the much-anticipated sale of most of its Oil, Gas and Petrochemicals business (OGP).
ABB said the US investment bank JP Morgan and the British firms 3i Group and Candover had bought the unit for $925 million (SFr1.17 billion).
The deal does not include the OGP’s asbestos-plagued Lummus Global unit. ABB expects to sell this part of the business some time this year.
A preliminary agreement had been announced in October, but the complex negotiations meant the deal was only finalised now. The sale price is at the lower end of what was agreed last October, but another $50 million may be paid out depending on how the business performs.
The OGP business will be renamed Vetco International and no job cuts are expected. Markus Reich, co-director of 3i's Swiss subsidiary said on Saturday the consortium is looking at expanding the new company's growth.
The sale was at the centre of ABB’s promise to its creditors that it would reduce debt, which stood at $8.5 billion last September, by around $2 billion before the end of 2003.
"This divestment agreement marks a further decisive step to increase the focus on our core businesses and to finalise our divestment programme," said in a statement ABB's finance chief, Peter Voser.
Many analysts were poised to write the company off after it issued a series of bleak profit warnings in 2002, and recorded a $787 million loss.
Struggling to cope with debts accrued during the late 1990s boom years, ABB’s newly appointed management – headed by chairman and CEO Jürgen Dormann – embarked on an extensive cost-cutting plan.
Still underway, the plan includes reducing the firm’s global workforce to below 100,000 from a peak of 140,000.
Dormann’s strategy has also been based on returning the company to its core strengths – making products for electrical transmission systems (such as power-grid components) and robotics.
That has meant selling off unwanted assets. The OGP sell-off is by far the most important of these.
The long-awaited sale has also helped the company restore investor confidence.
Well before the latest deal was confirmed, ABB raised more than SFr1 billion in a convertible bond issue – a move considered unthinkable early last year.
The unit’s sale received a major boost mid-2003 after a US court accepted a $1.2 billion asbestos settlement for former workers at the ABB’s subsidiary, Combustion Engineering.
The decision limited potentially ruinous claims against other ABB divisions, including OGP. Depsite ongoing appeals, the company expects the case to be concluded in the first half of the year.
swissinfo, Jacob Greber in Zurich
A preliminary agreement was signed between ABB and a group of investors in October and now the $925 million deal has gone through.
Investment bank JP Morgan and the British firms 3i Group and Candover, who have bought the division, have pledged they will not axe staff.
ABB has been struggling to slash a mountain of debt accrued during the late 1990s and is in the process of shedding unwanted assets.
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