Recently, ABB Ltd. (ABB) announced that its has signed an agreement to divest Thomas & Betts’ heating, ventilation and air conditioning (:HVAC) business to Nortek Inc. (NTK). The deal is an all-cash transaction valued at $260 million and is expected to close in the second quarter of 2014.
The strategic decision to divest the HVAC business has come after a careful consideration through the continuous process of portfolio optimization. Management at ABB believes that this business had restricted synergies to the company’s core portfolio, proving it to be more of a drag for the company. However, ABB intends to continue to supply its high efficiency electrical motors and industry leading drives as well as its low voltage products range to the HVAC industry.
In fiscal 2012, ABB had primarily acquired Thomas & Betts to expand its reach in the Low Voltage Products segment across key geographies such as, North America, Europe and Asia. The combination of ABB’s low-voltage protection, control and measurement products with the electrical components business of Thomas & Betts has created a broad portfolio of products.
On the other hand, the acquisition of the HVAC business is a perfect fit for Nortek’s existing line of heating and air conditioning products. This Rhode Island-based company is a leading manufacturer and marketer of remodeling and replacement, residential and commercial new construction, manufactured housing as well as personal and enterprise computer solutions.
This acquisition is likely to be integrated with the company’s Custom & Engineered Solutions segment which offers custom-designed and engineered HVAC products and systems for healthcare and educational facilities, commercial offices, manufacturing facilities, clean rooms, data centers and governmental buildings.
Following this divestiture, ABB intends to continue to focus on its electrical business and cater to the approximately $24 billion potential North American market, that ABB acquired access to after the purchase of Thomas & Betts.