UPDATE 1-ABB aims to raise Indian unit stake to 75 pct

* Potential value of deal at offer price is $965 mln

* Offers shareholders of ABB Limited 34 pct premium

* Shares in ABB fall 2.5 pct, underperform index

* Shares in ABB Limited India jump 22.5 percent

(Adds analyst comment, shares)

By Katie Reid and Catherine Bosley

ZURICH, May 17 (BestGrowthStock) – ABB (ABBN.VX: ) plans to raise its
stake in its Indian subsidiary (ABB.BO: ) in a deal worth up to
$965 million, a move that would strengthen its position in the
fast-growing Indian market.

The seller of power equipment to utilities and oil and gas
companies said on Monday it intended to raise its stake to 75
percent from 52 percent and offered shareholders 900 rupees
($19.7) per share — a premium of about 34 percent to Friday’s
closing price.

The news lifted shares in ABB Limited India, which rose 22.5
percent, but shares in ABB slipped 1.6 percent at 0903 GMT,
underperforming the STOXX 600 industrial goods and services
index (.SXNP: ), and some analysts said the deal was rather

“ABB pays 3 times sales for the increase in its stake in
India, which is not cheap but probably justified by its growth
potential,” Julius Baer said in a research note.

The Swiss group tapped its war chest earlier this month to
buy U.S. software company Ventyx for over $1 billion, its first
billion-dollar deal in more than 10 years and the first major
buy under Chief Executive Joe Hogan. [ID:nLDE64404U]

Analysts have been watching the company closely over recent
years to see how it will deploy its cash pile of more than $7

Vontobel analyst Fabian Haecki said ABB had a realistic
chance of getting the shares tendered given the 34 percent
premium and said the deal made sense.

“We think that the Indian market is of great strategic
importance for ABB given its superior secular growth potential,”
Haecki said in a note.

ABB India had revenue of $1.4 billion and profit before tax
of $117 million in 2009, ABB said.

The open offer will be managed by HSBC Securities and
Capital Markets (India) Private Limited. The offer is expected
to begin on July 8 and end on July 27, while payment for the
shares is expected to take place on Aug. 10, ABB said.

Stock Analysis

(Editing by Hans Peters)

UPDATE 1-ABB aims to raise Indian unit stake to 75 pct