Hitachi is to acquire just over 80% of ABB’s power grids business, with an option to buy the remaining stake.
The Japanese giant will initially pay ¥704bn (€5.5bn) to take an 80.1% interest, in a deal that is expected to close in the first half of next year.
The option for the outstanding 19.9% is exercisable three years after closing of the initial transaction.
The unit will be headquartered in Switzerland, with Hitachi retaining the ABB power grids management team in order to “ensure business continuity”.
Hitachi said the combination of ABB’s grid offering and Hitachi’s digital technology will provide “innovative energy solutions globally”.
The Japanese company aims to expand its social innovation business, not only in power and energy, but also in mobility, such as railways and electric vehicles, life (smart-city and buildings) and industry.
Hitachi president and chief executive Toshiaki Higashihara said: “Today’s agreement between ABB and Hitachi is a significant turning point in the global power and energy markets at a time when digital technology is fundamentally changing our society and the pattern of energy demand and supply is diversifying.
“Hitachi will combine ABB’s strengths in the power grids business with our digital technology to build an energy platform that contributes to innovating the energy business.
“This creates further innovation for business fields such as life and industry and helps us address society’s issues and improve quality of life.”
ABB chief executive Ulrich Spiesshofer said: “The combination of ABB’s power grids business with Hitachi positions power grids business for a successful long-term future as a globally leading infrastructure business.
“We crystallise the value we have built through the transformation of the last years and focus new ABB on digital industries. ABB’s power grids business will strengthen Hitachi as global leader in energy infrastructure and Hitachi will strengthen the position of ABB’s power grids business as a global leader.
“Our shareholders will directly benefit through the return of the proceeds of the divestment. Building on our existing partnership announced in 2014, the initial joint venture will provide continuity for customers and our global team.”