ABB Ltd share price up, plans a $4-billion share buyback

The Chief Executive Officer of ABB Ltd Ulrich Spiesshofer officially announced an unexpected $4-billion-share buyback in a push to restore investor confidence in the worlds biggest power-grid manufacturer. The move comes as a sweetener to investors after its stock underperformed some of its rivals, including Siemens AG over the past year.

As Mr. Spiesshofer explained to investors in London today, the buyback program of ABB, which is considered the largest one of the company since 2008, will be funded by cash from recent sales and existing cash.

“It is a strong vote of confidence in the future growth potential of ABB,” Spiesshofer said in a statement, which was cited by Reuters. “At the moment, I feel very strongly that its the right decision to return the cash to shareholders and not embark on additional large scale acquisitions.”

ABB revealed today that the shares which will be bought back are equal to about 7.5% of its outstanding share capital at the current share price, from September 16th this year. As Mr. Spiesshofer said in the statement cited by the Wall Street Journal, the planned buyback will provide the companys shareholders with the opportunity to benefit from the proceeds from “recent pruning of noncore businesses”.

Mr. Spiesshofer took over the helm in September 2013 and has ever since spent most of his time evaluating the companys activities and disposing of about $1 billion in noncore businesses, some of which were related to previous purchases. The last disposal of ABB was the sale of a steel-structures division, which was part of Thomas & Betts.

The news of the buybacks was accepted gladly by the companys shareholders. However, ABB is still one of the worst-performing blue-chip Swiss stocks so far in 2014.

The Kepler Cheuvreux analyst Hans-Joachim Heimbuerger commented for Bloomberg: “With around half of group sales coming from emerging markets and two-thirds from power, metals and mining, and oil and gas end-markets, we see continued growth challenges, at least in the short term.”

ABB Ltd added 1.54% by 12:34 GMT to trade at CHF21.79 per share in Zurich, marking a one year change of +4.01%. The company is valued at CHF49.90 billion.