(Nov 7): SoftBank Group Corp and ABB Ltd are looking at carving out the Chinese part of a giant robotics deal as they explore ways to salvage a transaction blocked by Beijing, according to people familiar with the matter.
The two companies and their advisers are trying to find a solution after China’s powerful Office of the Working Mechanism for Foreign Investment Security Review on Thursday halted SoftBank’s move to acquire the ABB unit valued at US$5.4 billion (RM21.9 billion).
They are studying how the Chinese business, which is ABB Robotics’ largest single market, could be separated out, the people said. SoftBank is leading the push, people added, asking not to be identified as the talks were private.
These efforts may fail and there’s no certainty they will result in a deal, the people said. ABB is also reviewing other options including finding another buyer, one person said, adding that the business could be potentially valued at US$2 billion to US$3 billion.
ABB and SoftBank declined to comment.
A carve-out would entail setting up a separate entity for the China unit with different ownership, the people said. That’s an attempt to assuage the Chinese government’s worries over the need to safeguard its data and technology in an increasing global race towards greater artificial intelligence.
Beijing has a say in the takeover because ABB Robotics has a significant robotics production and development facility in Shanghai, which has benefitted from state support and local government backing. While no reason for the prohibition on the deal was announced, China has clamped down on the transfer of vital information abroad.
The decision came as a surprise to Switzerland’s ABB, which expected the robotics divestment to be closed by year end, the people said. SoftBank’s Masayoshi Son had separately told SoftBank officials that he didn’t believe that the transaction would need to involve the Chinese government, one person said.
Other options on the table include moving back to a spin-off of the robotics unit, which was the initial plan for the business. At the time, the likely listing venues were in Switzerland and Sweden.
However, this option is seen as particularly complicated given the divestment deal was already signed and a listing wouldn’t be particularly welcomed by markets now, the people said. SoftBank’s shares slumped 11% in Tokyo on Friday following a global rout in technology after the US midterm elections.
The proceeds from a SoftBank deal were expected to be deployed by ABB in other acquisitions. The China blockage cuts ABB’s firepower in half to about US$5 billion, according to Citigroup Inc analyst Martin Wilkie. ABB’s shares also slipped on riday to take losses for the week to more than 5%.
As of 2024, the robotics division employed around 7,000 people and generated US$2.3 billion in revenue, or roughly 7% of ABB’s sales. It operates manufacturing hubs in Sweden, the US and China and competes with the likes of Japan’s FANUC Corp, Yaskawa Electric Corp and Midea Group Co’s Kuka.