Cevian has forced Ulrich Spiesshofer to restructure ABB
Cevian has forced Ulrich Spiesshofer to restructure ABB © Reuters

Smoke-belching industrial metropolises roam Europe on tank tracks in the steampunk epic Mortal Engines. They devour whole industries before imploding. ABB boss Ulrich Spiesshofer has good reason to avoid the movie, two-star reviews aside: it is too close to home. An activist has forced him to restructure, dumping a power grids division via an $11bn disposal. ABB will clank onward. Mr Spiesshofer’s role at the helm remains uncertain.

Bloated bureaucracies and poor returns have left European conglomerates exposed. ABB is the second big victory for Cevian of late. The Sweden-based “constructivist” also pressured Thyssenkrupp to spin off a steel unit. Pernod Ricard and Nestlé are under attack from US activists.

Steampunk fiction is classed as “alternative history”. One might define the narrative offered by Mr Spiesshofer the same way. ABB is selling a division that produces high-voltage electrical kit, because the time is right, apparently. Cevian was not mentioned. Payouts to investors were tallied up. A 5.4 per cent fall in the shares during Mr Spiesshofer’s incumbency was lower in the mix.

The stock was unchanged by the restructuring news. The sale to Hitachi at an enterprise value of $11bn is at the low end of expectations. Without new borrowing, the capital return to ABB shareholders would be about $1bn less than the $7.6bn to $7.8bn targeted.

Even a pledge to save $500m in costs did not move the needle. Taxed and capitalised, that should be worth almost $4bn, nearly one-tenth of ABB’s market worth. The group expects to raise operating margins by as much as 4 percentage points from 12 per cent today. That looks do-able.

Mr Spiesshofer’s presentation was admirably slick. But the share price suggests he is in the unenviable position of an incumbent re-applying for his job. Until cost savings materialise, he will be a probationer. By acting sooner, bosses of other conglomerates can avoid that jeopardy.

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