ABB chief in shock exit as takeovers loom
Zurich, February 13, 2008
Engineering group ABB's chief executive Fred Kindle has left after a clash over strategy, in a shock move announced on Wednesday amid speculation over his plans for acquisitions.
The Swiss-based company also announced a share buyback programme worth up to 2.2 billion francs ($1.99 billion) and doubled its dividend, unveiling quarterly results a day early that beat even the most optimistic estimates, in part due to tax benefits.
'Fred Kindle is leaving the company due to irreconcilable differences of opinion about how to lead the company,' the group said in a statement. Chief financial officer Michel Demare will serve as interim CEO.
Investors have long sought clues as to how ABB, which is benefiting from a boom in electricity generation, plans to spend cash reserves as speculation about plans to grow through acquisitions mounts.
Kindle has long held that large takeovers were not on the cards, in part due to the high price of assets, and analysts have speculated that the group would target bolt-on buys worth $1.5 billion to $2 billion instead.
Kindle restored growth and stability to a global group that was on the brink of collapse due to heavy debt.
The company, which sells equipment to utilities and to oil and gas companies, is thought to have cash reserves of around $5 billion that could be used for takeovers.
ABB's fourth-quarter net profit rose to $1.8 billion, beating the highest estimate in a Reuters poll of 19 analysts, as it benefited from a positive impact from tax assets.
Orders received rose to $8.9 billion from $7.5 billion in the year-ago period and revenue rose to $8.7 billion from $7.2 billion in 2006, with both figures beating the average estimates in the Reuters poll.
ABB is benefiting as Europe and the United States are replacing ageing power systems, while rapid economic growth in emerging economies is forcing countries such as India and China to invest heavily in power infrastructure.
The group said its net profit figure included the gain on the sale of its Lummus Global unit of $530 million as well as a positive impact of $475 million from the recognition of deferred tax assets.
Shares in ABB, which competes with Germany's Siemens and France's Schneider, have fallen more than 16 per cent this year on concerns about the cyclical exposure in the group's automation products unit.-Reuters