CORRECTED – UPDATE 3-ABB to buy Chloride Group for $1.25 bln

(Corrects name of Emerson Electric Co in paragraphs 1 and 3)

* ABB offers 325 p/share in agreed all-cash deal

* Chloride shares surge 18 pct to record on counterbid hopes

* ABB stock gains 0.3 pct

(Releads, adds ABB and analyst comment, updates shares)

By Catherine Bosley and Quentin Webb

ZURICH/LONDON, June 8 (BestGrowthStock) – Switzerland’s ABB
(ABBN.VX: ) on Tuesday announced an all-cash deal to buy Britain’s
Chloride Group (CHLD.L: ) for 860 million pounds ($1.25 billion),
possibly setting off a bidding war with spurned U.S. suitor
Emerson Electric Co (EMR.N: ).

The Swiss group, which sells power equipment to oil and gas
companies, said it would offer 325 pence per share to Chloride,
whose products protect against power shortages at Heathrow’s
Terminal 5 and Arsenal’s Emirates soccer stadium.

Chloride in April rejected an offer for 723 million pounds
from Emerson, with big shareholders saying its European
footprint and the industry’s high barriers to entry meant it was
worth significantly more. [ID:nLDE63P06M]

Shares in Chloride surged 18 percent to an all-time high of
340 pence, indicating the market expected a counterbid. Emerson
said it would make a statement on the ABB-Chloride deal later.

“The bid from ABB is a surprise as ABB has no direct
interest in these markets but does have extensive skills,
products and market share in electrical power and automation,”
said Seymour Pierce analyst Ian Robertson.

Robertson said Emerson could counter-offer as much as 373
pence a share, based on its return targets for “strategic” deals
and an estimated 20 million pounds of cost savings.

However, Zuercher Kantonalbank analyst Richard Frei said he
thought the deal would go through because Chloride’s board had
agreed to it, though rivals such as Schneider (SCHN.PA: ) or
Emerson could also bid.

“Strategically it’s certainly sensible (for ABB),” Frei
said. “On the one hand it fits well into the product portfolio,
on the other it fits well with the client base they have and
opens new possibilities for gaining new clients.”

“(But) the price is very expensive — which probably has to
do with the rejected bid by Emerson,” he said.

The acquisition must be approved by Chloride’s shareholders,
the UK High Court and regulators.

Robertson at Seymour Pierce said the deal valued Chloride at
about 25 times its estimated earnings for the year to March
2011, roughly double ABB’s own price-earnings (PE) ratio for the
year to December 2011. However, previous deals in the sector
have been struck at as much as 30 times prospective earnings.

Shares in ABB were up 0.3 percent at 19.28 francs per share
at 1053 GMT, compared with a 0.6 percent drop in the STOXX 600
industrial goods sector index (.SXNP: ).


ABB had $7.1 billion in net cash at the end of the first
quarter and had been expected to go on a buying spree.

ABB Chief Executive Joe Hogan said the deal was a “growth
acquisition” and followed a year of discussions between his
company and Chloride.

“Obviously Emerson’s putting them in play here recently
probably forced us to move faster than we would. But we had an
interest in this marketplace and in Chloride specifically for a
period of time,” Hogan said.

Chloride, which reported revenue of 336 million pounds in
the year to March, will be part of ABB’s discreet automation
division. Last November, ABB revamped its automation divisions
and triggered talk it was about to go for a buy. [ID:nGEE5AQ03P]

The Chloride deal is ABB’s second since early May. It
announced the purchase of U.S. software group Ventyx, and then a
fortnight later said it was raising its stake in its Indian
subsidiary. [ID:nLDE64404U] [ID:nLDE64G0HB]

Credit Suisse is advising ABB. Citi and Investec are
advising Chloride. Emerson took advice from JP Morgan Cazenove
and Greenhill & Co.


($1=.6892 Pound)
(Editing by Simon Jessop)

CORRECTED – UPDATE 3-ABB to buy Chloride Group for $1.25 bln