ABB to press ahead with acquisitions after $5.5 billion Rotork deal

By John Revill

ZURICH, July 16 (Reuters) - ABB has $14 billion for further acquisitions, CEO Morten Wierod said on Thursday, after the Swiss engineering group announced a record $5.5 billion purchase of British automation company Rotork.

Wierod said the Zurich-based company could also continue to invest in research and development, buy back shares and pay dividends.

"We still have firepower to do more M&A deals," Wierod said, citing ABB's low debt, cash flow, as well as money raised from selling other businesses like its decision last year to offload its robotics division.

"We have a good pipeline of deals that we are working on," he said, adding that it would pursue small deals while large acquisitions were possible.

The Rotork deal marks a step change for ABB, which has been reshaping its portfolio in recent years to focus more on electrification and automation.

ABB DEFENDS DEAL PRICE

ABB Chair Peter Voser told Reuters in March that ABB was eyeing larger acquisitions, as the company sought to speed up growth after years of divestments.

The recommended cash offer for Rotork exceeds ABB's $4.2 billion deal for motors and drives maker Baldor in 2011 and its $3.9 billion purchase of electrical components company Thomas & Betts in 2012.

Rotork makes equipment that automatically opens, closes, and controls valves that regulate the flow of liquids and gases, for customers in oil and gas, water and wastewater, power generation, chemicals and mining sectors.

Analysts said the deal was pricy, but ABB said Rotork was a high-performing company, with annual sales of around $1 billion that have been growing by around 8% annually.

With a profit margin of 24.6%, Rotork is expected to be immediately accretive to ABB's own margin, which rose again during its latest quarter, the company also reported on Thursday.

ABB's shares were 4% down in midday trading, with one investor citing some profit taking after strong gains in recent months.

The Rotork deal is the latest foreign bid for a UK company, putting Britain on track to outstrip all previous years for dealmaking in 2026.

It follows bids for Britain's Intertek, Schroders and Unilever's food unit, as well as U.S.-listed Ingredion's offer for Tate & Lyle, which came in June.

ABB said it was funding the Rotork acquisition with the $4.8 billion proceeds from its decision last October to sell its robotics division to SoftBank Group.

Rothschild & Co was joint lead financial adviser to Rotork, while Barclays was ABB's sole financial adviser. JPMorgan and Jefferies were other co-advisers to Rotork.

In its second quarter ABB, which makes electrification and automation products used by factories, ships and ports, said its operational earnings before interest, tax and amortisation (EBITA) rose 20% to $1.93 billion in the three months to the end of June, beating forecasts for $1.88 billion.

Orders, meanwhile, jumped 30% to $12.04 billion, said ABB, which has benefited from strong demand for products for data centres being built to support artificial intelligence.

(Reporting by John Revill, additional reporting by Oliver Hirt; Editing by Miranda Murray, Mark Potter and Emelia Sithole-Matarise)