ABB has been putting together a deal for the sale of its Power Grids Division to Hitachi. The terms of the sale have now been agreed and the completion of the sale will be in 2020. The sale of Power Grids will remove about 30% of the revenue reported in the FY 2017 Annual Report. The sale of the Power Grids division creates a complication when considering the value of ABB. The full report includes a special section to allow value investors to assess the impact of the Power Grids sales on the assessment of a fair price for the common stock of ABB.
The ABB share price has declined about 30% in the last 12 months or so. The price decline is roughly equivalent to the potential lost revenue from the sale of the Power grids division. As ABB will be paid by Hitachi for the Power grids division it is possible that the current low price creates a good price for value investors.
The rationale behind the deal with Hitachi can be found in the latest investor presentation on the ABB Investor Relations website here. The deal to sell the Power Grids Division starts at slide 26.
One of the indicators to show that ABB is cheap is when the yield goes over 4%. ABB has a long dividend history and very rarely trades over 4% yield. Right now ABB can be bought with a yield over 4%.
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