ABB chairman likely to pursue more acquisitions

Swiss engineering firm ABB's Chairman Hubertus von Gruenberg looks poised to pursue takeovers at the group as acquisition prices tumble and he assumes a more hands-on role, investors and analysts said.

ABB, which sells equipment to utilities as well as to oil and gas companies, has so far shied away from using its cash pile to pick up rivals.

But it may be more acquisitive after a clash this month between von Gruenberg and Chief Executive Fred Kindle pushed the latter out.

"I think something could be in the pipeline, otherwise Kindle's departure would not have been so dramatic," said Thomas Lusetti, fund manager at VP Bank.

"It is possible that von Gruenberg was looking more closely at a target which Kindle was not happy about going for."

Investment bankers said ABB is unlikely to undertake any significant acquisitions before naming a new CEO.

But Von Gruenberg, who is also chairman at Continental AG, has said ABB's board is "ready to move" on any suitable acquisition target and is looking for a CEO that has experience making buys.

Von Gruenberg led an acquisitive strategy at Continental, which picked up Alfred Teves in 1998 and Siemens' VDO business nine years later.

Kindle held off from making major buys either as head of engineering group Sulzer SUN.S or as ABB chief, despite the brimming war chest - a stance investors appreciated.

"If ABB had bought something last year, then people would have said that they paid between 20 and 30 percent too much. Now share prices are somewhere else," said Landsbanki Kepler analyst Christoph Ladner.

Shares in potential target Schneider have fallen some 12 percent so far this year and the stocks of US-based firms Emerson, Eaton and Cooper - all of which might spark ABB's interest - have also lost ground.

"The longer ABB waits the bigger the appetite gets. The mood is changing at ABB," said ZKB analyst Mark Diethelm.

ABB, which has not made any acquisitions since a spending spree in the 1990s pushed it to the brink of bankruptcy, has a $5.4 billion war chest and some analysts believe it could snap up a company like France's Legrand or Schneider.

With a market value of $55.5 billion, ABB could use cash and shares to buy Schneider, said Societe Generale analyst Gerard Moore. ABB shares trade at a premium of some 50 percent to Schneider's, according to Reuters data.

"This link up would be the most attractive from an industrial perspective.

"It would create a leader in the medium/low voltage market as well as the automation market," said Moore, who argued Legrand and America's Rockwell Automation would also be a good fit for ABB.

Schneider has a market value of $28 billion, while Legrand and Rockwell are both worth around $9 billion.

"At the moment, as far as takeovers are concerned, anything in the range of 10 billion Swiss francs ($9.18 billion) is possible," said VP Bank's Lusetti.

Agencies

(China Daily 02/28/2008 page16)