The Swiss industrial technology group anticipates the completed acquisition will add 3 percentage points to its revenue.
ABB Ltd (ASX: ABB) reported its second-quarter net profit rose to $1.23 billion from $1.15 billion a year earlier.
Industrial automation giant ABB Ltd (share price down 4.06%) announced it has reached an agreement to acquire UK-based industrial equipment manufacturer Rotork for £4.14 billion (equivalent to $5.6 billion), a move aimed at strengthening its automation business segment.
The Swiss industrial technology firm stated on Thursday that the acquisition will be funded using a portion of the $54 billion proceeds from the recent sale of its robotics business to SoftBank Group (share price down 6.27%), and that the company will retain ample financial resources for further mergers and acquisitions following the transaction.
Like other industrial conglomerates, ABB Ltd is benefiting from surging demand for data center-related equipment while simultaneously expanding its electrification and automation product lines through ongoing acquisitions.
ABB's Chief Executive Officer, Morten Wierod, stated that the company's current balance sheet is robust, enabling it to continue pursuing merger and integration activities while also sustaining its share buyback program.
The acquisition is an all-cash offer at a price of 503 pence per share. Rotork disclosed that, on a fully diluted share capital basis, the transaction implies an enterprise valuation of approximately £4.14 billion, representing a 73% premium to Rotork's closing share price on Wednesday.
Rotork's board of directors unanimously agreed to recommend the acquisition proposal to all shareholders.
During early European trading, Rotork's share price surged 67% to 485.40 pence, bringing its year-to-date gain to 49%. Meanwhile, ABB Ltd's share price fell 2.9% to 80.74 Swiss francs.
ABB Ltd expects the transaction to be completed in the first half of 2027. Upon closing, the deal is projected to directly increase the company's total revenue by 3% and enhance its overall profitability.
Rotork generated full-year revenue of £777 million last year. This acquisition marks the latest in a series of M&A deals by ABB Ltd this year. The Zurich-headquartered company recently announced the acquisition of French firm Advantics (deal terms undisclosed) and has completed several other acquisitions focused on the electrification and automation sectors.
Concurrently with announcing the Rotork acquisition, ABB Ltd raised its full-year comparable revenue growth guidance. The new forecast anticipates comparable revenue growth in the low double-digit percentage range, up from the previous guidance of high single-digit to low double-digit growth.
Financial results show that ABB Ltd's second-quarter comparable revenue increased 12% year-over-year to $9.475 billion, slightly exceeding the market consensus estimate of $9.47 billion.
Net profit for the period rose to $1.23 billion from $1.15 billion in the prior-year period. New order intake reached a record high, with comparable orders increasing 28% year-over-year to $12.04 billion.
Operational EBITA (Earnings Before Interest, Taxes, and Amortization) on a comparable basis increased 18% to $1.925 billion, with a margin of 20.2%, up from 19.3% a year ago.
Market analysts had previously forecasted a consensus net profit of $1.32 billion and operational EBITA of $1.88 billion, making the reported profit figures slightly below expectations.
ABB Ltd also disclosed plans to invest approximately $200 million over the next three years to expand its medium-voltage equipment production capacity in Europe.
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