ABB sells the Power Grids department to Hitachi in a $ 11 billion agreement

TOKYO / ZURICH (Reuters) ̵[ads1]1; ABB ( ABBN.S ) will sell 80.1 percent of its Power Grids division to Japan's Hitachi ( 6501.T ), said the Swiss engineering group on Monday that it would return net cash income of $ 7, 6-7.8 billion from the agreement to shareholders.

The Zurich-based company, which said the transaction, put Power Grid's business values ​​of $ 11 billion, also said on Monday that it would be to change the structure of the remaining businesses.

This conversion will result in about $ 500 million annual cost reductions after $ 500 million in restructuring fees.

ABB will initially retain 19.9 percent of Power Grids, the company said, with an agreement including the opportunity to fair market value, with a floor price of 90 percent of the enterprise value, exercised by ABB three years after completion.

Reuters reported earlier that the two companies were negotiating a transaction.

The acquisition would enable Hitachi to increase its global presence in the grid, while ABB, which also makes industrial robots, will relieve its least profitable division to focus on areas such as automation.

"Our four newly established businesses, each global leader, will be well-adapted to the way our customers operate, focusing more heavily on new technologies such as artificial intelligence," said Ulrich Spiesshofer, Director of ABB, in a statement.

ABB's Power Grids business employs 36,000 people and had sales of $ 10.4 billion last year. It had an operating profit margin of 10.0 percent in the third quarter, down 60 basis points from the previous year.

The decision to sell Power Grids marks a Spiesshofer U-turn, which decided to hold the business two years ago despite conversations from some shareholders to sell.