ABB

ABB has announced the sale of its Robotics business to Softbank for an EV of $5.38bn with the closing expected to be in H2 2026. The Robotics business generated revenues of $2.3bn in 2024 with an Operational EBITA margin of 12.1%. The key reason for divestment was to find the business a more suitable owner than ABB as the business faced intense competitive pressure, particularly in China, since the pandemic. We believe the purchase price is attractive for ABB shareholders and we expect the proceeds to be paid back to shareholders through a buyback.

Following the divestment, ABB will report Robotics within discontinued operations, and the Discrete Automation business will be combined with the Process Automation business to create a single Automation franchise.

The disposal price is 29% above our valuation for the division at $4.2bn but note that the division also includes discrete automation that generates c $800m in sales with very low margin. Assuming a 1x sales valuation, the total value for the division (robotics + discrete automation) ends up at $6.2bn (5.4bn +800m) which is actually 47% above our current valuation. 

When plugging that $6.2bn in our sum of the part valuation (leaving other parts unchanged), the SOTP per share stands at CHF51.7 per share, still 13% below the last share price. Yet we expect a strong positive reaction this morning.

This is good news in our opinion as the valuations stand almost 50% above our previous estimate for the division.

However, even when plugging in that valuation, our target price is still 13% below the current share price. Despite the fantastic underlying quality of the company (Fundamental strength of 9/10), we maintain a negative rating on the name due to the excessive valuation. Stock trades with PE 25 and 26 of 31x and 29x.  

This is also a positive for Investor (Holding Reduce) as ABB's top shareholder. According to our calculations, the proceeds from the sale of ABB Robotics business could lead to a SEK c.6bn worth of dividends for Investor (total incoming dividends in 2024 were SEK 15bn) if the proceeds were returned to shareholders via dividends. This will not happen as ABB generally favours SBB to extra dividend but good news nonetheless for Investor.