ABB set to sell oil and gas business
6 Nov 2003
After months of rumours and speculation, ABB has finally confirmed that it is to sell most of its oil, gas and petrochemicals business to a private equity consortium.
The sale, to Candover Partners, JP Morgan Partners LLC and 3i Group, will net the company between $925million and $975million. However, the deal is being delayed because of an investigation into potentially improper payments in Africa, Central Asia and South America.
The agreement has already been delayed once - in June, ABB disclosed to the US Securities and Exchange Commission that there was the possibility of improper payments in an African country. In subsequent internal investigations, it says, it uncovered more improper payments in Asia and South America. ABB has now also disclosed these to the SEC and Department of Justice.
Despite this, ABB expects the definitive agreement for the sale to be signed before the end of this year. In the meantime, the company has reshuffled management responsibilities for the affected businesses: the chief financial officer, Peter Voser, is to take direct responsibility for the businesses, with Samir Brikho, formerly a senior manager at Alstom, as business area manager for ABB Lummus Global, including the floating production systems unit in Houston, Texas.
The proceeds of the divestment will go towards ABB's refinancing plan, aimed at paying off the group's massive debt. The plan includes the issue of 1.2billion new shares, worth some $2.5billion; the launch of a bond scheme worth around e650milllion; and a $1billion bank credit facility. Even so, this will only cut ABB's debt to $7.3billion - short of chairman and chief executive Jurgen Dormann's target of $6.5billion.
Dormann says that these measures should stabilise ABB's finances until 2006. 'The company has made steady progress over the past 12 months, and the capital strengthening programme is designed to ensure ABB has both financial stability and flexibility,' he says. 'This is not the light at the end of the tunnel - this is the end of the tunnel.'
