ABB Schneider "Wagon" China Electric Market

The year 2011 is a particularly significant year for China's electrical market: China has become the world's largest market for electric energy development and application, and China has also replaced the United States as a highland for global power system innovation and technological progress. Against this backdrop, the Chinese electrical market has also become the largest destination for global electrical technology suppliers to innovate and apply new technologies. In particular, several of the world’s top 500 electrical giants have also made unprecedented strong offensives in the Chinese market. In particular, ABB and Schneider Electric recently performed most prominently in China.

In 2010, ABB’s orders in China were US$4.5 billion, an increase of 10%, accounting for 14% of the global total, sales of US$4.4 billion, an increase of 3%, accounting for a global share of 14%, and China’s global presence in ABB. The first major market position has been further strengthened. In 2010, the development of ABB's two major businesses in China's power and automation industry has undergone a major division. The two major businesses were basically evenly divided. In 2010, orders for automation business increased by 42% year-on-year, accounting for 61% of ABB's orders in China. However, orders for electricity dropped by 19%, and its share decreased to 39%. The main reason for the drop in power orders was the drop in power transmission business.

In the past three years since the global financial crisis broke out, ABB’s total investment in China has increased by 500 million U.S. dollars. A total of 30 companies in China are committed to local manufacturing and design. ABB's strategy in China has evolved from "in China, for China" to "in China, for China and the world," and has increased investment in innovation and R&D.

In the face of the severely challenged power business, ABB China has increased its investment in this business and changed the practice of previous holdings. On June 12th, ABB (China) Co., Ltd. and Guodian Nanjing Automation Co., Ltd. established a joint venture to establish Nanjing Guodian Nanzi Automation Co., Ltd. to jointly integrate their respective power grid automation businesses, achieve strong alliances, improve the competitiveness of the enterprise's market, and promote China We have made positive contributions to the development of electric power automation in the world and beyond. The two sides jointly contributed 1.745 billion yuan, of which the registered capital was 800 million yuan, and the remaining 945 million yuan was included in capital reserve. In the total capital contribution, Guodian South plans to invest 889.95 million yuan, of which 408 million yuan will be counted in the registered capital, accounting for 51% of the joint venture company, and the rest will be included in the capital reserve; ABB China plans to invest 85.50 million yuan, of which 392 million yuan. Including the registered capital, accounting for 49% of the shares of the joint venture company, with the rest being included in the capital reserve. ABB's power automation is powerful globally, but it has not been a big issue in the Chinese market. This unprecedented move should be able to share more benefits from the rapidly growing Chinese power automation market.

Schneider Electric has made extraordinary development in recent years, and the acquisition has made a great contribution. In 2007, Delixi Group established Delixi Electric Power Co., Ltd. with a share of each half of the shares, seizing the huge market for low-voltage low-end appliances in China, and has achieved good market results. After the acquisition of Areva's power distribution business in 2010, Schneider Electric's strength in China has increased again. Schneider Electric recently conducted a major merger in China's energy-saving market.

Schneider Electric recently announced that it has signed an acquisition agreement to acquire Lead Huafu Electric Technology Holdings Co., Ltd. (Lide Huafu). Beijing-based Leader Huafu is engaged in the development, production and sales of medium voltage inverters. The company employs more than 750 people and has a sales and service support network covering 30 provincial districts. The company's annual growth rate in the past few years exceeds 20%, and it is expected to achieve sales of approximately US$150 million this year, with an EBITDA surplus of approximately 20%.

Leader Huafu will bring to Schneider Electric: Medium-voltage inverter technology advantages, will play a key role in promoting energy-saving and efficiency-enhancing business; Medium-voltage system in the Chinese market, which accounts for about 40% of the world's medium-voltage inverter market The strong position occupied by the frequency converter field; perfect industry solutions, especially in end markets such as cement, mining, metallurgy and power; regional acquisition network with 150 sales representatives and 100 service engineers This acquisition will further improve Schneider Electrical energy-saving products and solutions in the target markets of emerging economies. Leadoff's medium voltage drives range from 2kV to 11kV, and Schneider Electric is already a leader in servicing low voltage drives in many different markets. Leader Huafu will also increase the Schneider Electric Group's ability to provide advanced services to its customers.

It is expected that this transaction will have significant synergies, and the positive impact on EBITA in 2015 due to this synergy can be estimated at US$25-300 million. This will mainly come from the cross-selling between the two companies' customer base in China and the geographical expansion of the business.

In terms of corporate value, the company’s total purchase price is approximately US$650 million. This transaction must be approved by the regulatory authorities to complete. The acquisition is expected to achieve an increase in earnings per share starting from the first year and will reach Schneider Electric’s investment capital return standard in 2015.