ABB Power launches open offer

ABB Power Products and Systems (ABPPS), the demerged power grid business of ABB, launched its offer to acquire up to 1.05 crore shares for Rs 917 crore from the public shareholders.

The open offer provides good exit option for investors stuck with the counter, which is largely owned by promoters. Besides, the offer price remains attractive given the board decision to pay interest on offer price.

On March 30, ABPPS revealed its plan to acquire its shares at a price of Rs 851 apiece. Later, it decided to pay an interest of Rs 14.92 per share on the offer price since March 30 and buy shares at a price of Rs 865.92 per equity share with face value of Rs 2 each. This could be a good bet at the current market price of Rs 750.

As per the offer, ABB along with Hitachi will acquire up to 1,05,95,419 fully paid up equity shares of face value of Rs 2 each in ABPPS constituting 25% of the voting share capital.

ABB Switzerland and Hitachi have together launched an open offer to acquire a fourth more in the local company at a premium of about 14%.

The acceptance ratio in ABPPS would be 100% as promoters hold 75% stake in the company.

In December 2018, the Swiss-Swedish engineering firm ABB sold 80.1% stake in its global power grids business to Japan’s Hitachi at an enterprise value of $11 billion.

The Zurich-based company, after the announcement of this deal, said that it would return net cash proceeds of $7.6-7.8 billion to shareholders. As a part of the global deal, ABB India demerged its power grid business into a separate entity, called APPSIL.

ABB Power Products and Systems India Ltd (APPSIL) is the Indian arm of ABB Power Grids – a global leader in power technologies, providing the most comprehensive grid portfolio across the entire value chain.

Net net we believe that this buyback offer would be a good opportunity to retail investors make significant upside in the near term for a business which may a long time to deliver strong numbers ahead.

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