ABB to acquire all shares in Elsag Bailey, aims to boost Automation business growth

Zurich, October 14, 1998 - ABB, the international engineering and technology group, today announced it has entered into agreements to acquire Elsag Bailey Process Automation N.V., one of the world's leading process automation groups, in a move to expand into new growth markets and strengthen key technologies.

Under the terms of the agreements(1), signed with Elsag Bailey Process Automation N.V. and its majority owner Finmeccanica SpA, ABB will make a public tender offer in cash for all of Elsag Bailey's outstanding common shares for US$ 39.30 per share, and for all of its outstanding Trust Originated Preferred Securities (TOPrS) for US$ 61.21 per TOPrS. The acquisition, valued on a fully diluted basis at approximately US$ 2.1 billion, including debt of about US$ 600 million, will make ABB a leading player in the global automation market.
The agreement calls for Finmeccanica, the Italian state-owned industrial group, to sell to ABB all issued common shares and TOPrS that it holds in Elsag Bailey. Finmeccanica owns approximately 53 percent of the outstanding equity of Elsag Bailey on a fully diluted basis.
ABB President and CEO, Göran Lindahl, said the acquisition "confirms our commitment to quickly achieving our strategic growth objectives. We have targeted the Automation segment as a growth business and Elsag Bailey clearly complements our automation activities in its geographic scope, customer base, and technology. Combining the businesses also holds significant synergy potential, which we expect to amount to some US$ 200 million a year on an operating earnings level in three to four years after the acquisition is completed."
Lindahl said the process automation market is expected to show average growth at about 5-6 percent a year over a business cycle. Current growth in this market is estimated to be around 2-3 percent, he added.
Mr. Vincenzo Cannatelli, Elsag Bailey Managing Director and Chief Executive Officer, said ABB was a good match for Elsag Bailey and will provide new economies of scale and scope to allow continued growth. "We are proud to have gained the commitment to partnership of a quality industry leader such as ABB. We have worked hard to position Elsag Bailey as a "one-stop-shop" producer of automation technologies," he said. "We have assembled a powerful portfolio of world-class technologies, geographic presence, dedicated employees, and satisfied customers, and we think ABB is the right partner to drive this development even further."
Lindahl said the acquisition will place ABB among the top suppliers worldwide in process control systems, analytics, and instrumentation. Elsag Bailey will also strengthen ABB's presence in the key automation markets of the U.S., Germany, Japan, Italy and France, he said. Due to substantially higher volumes, ABB and Elsag Bailey will enjoy greater efficiencies by combining resources in areas such as product development, manufacturing, service, and sales and distribution to serve a larger number of customers.
In 1997, Elsag Bailey - whose shares are traded on the New York Stock Exchange (EBY) - reported revenues of about US$ 1.5 billion and net income of US$ 36 million (before charges). The company, with headquarters in Amsterdam, The Netherlands, operates some 40 manufacturing units employing about 11,000 people in more than 30 countries.
Today's agreement has been approved by Finmeccanica's Board of Directors, and the Supervisory Board as well as the Board of Management of Elsag Bailey have unanimously recommended the proposed offer as fair and in the best interests of Elsag Bailey's shareholders.
The public tender offer is expected to commence within five business days of this announcement and will be subject to a number of conditions, including the tender of shares representing at least 75 percent of the outstanding shares. ABB said the transaction is not subject to financing. Credit Suisse First Boston will act as dealer manager for ABB's offer. The acquisition is also subject to the customary regulatory approvals in the U.S. and Europe.
Elsag Bailey Process Automation , headquartered in the Netherlands, is a leading provider of automation systems, process instrumentation, analytical measurement products, and professional services. The company's technologies are sold worldwide for the automation of various processes in the electric power, chemical and pharmaceutical, oil and gas, pulp and paper, metals and mining, food and beverage and other industries. The company employs some 11,000 among its operating units in more than 30 countries. Elsag Bailey recorded revenues of US$1.5 billion during 1997.
ABB's global automation business segment reported orders in 1997 on a pro forma basis of US$ 7.8 billion and employed 42,500 people worldwide (see attached fact sheet). The ABB Group employs approximately 220,000 people with orders in 1997 of about US$ 35 billion.

(1)
This announcement does not constitute the making of a tender offer for Elsag Bailey common stock or convertible preferred securities. The agreement and ABB's obligation to commence a tender offer (and the tender itself) will be subject to customary conditions, including preparation of the offering documents, and obtaining necessary regulatory and other approvals, including the expiration of all applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, and approved by way of a decision of the Commission of the European Communities.
The statements in this release relating to matters that are not historical facts are forward-looking statements that are not guarantees of future performance and involve risks and uncertainties, including but not limited to future global economic conditions, foreign exchange rates, regulatory approvals, market conditions, the actions of competitors and other factors beyond the control of the Company.

ABB Group
The ABB Group is a global engineering and technology company, headquartered in Zurich, Switzerland, serving customers in power generation, transmission and distribution; automation; oil, gas and petrochemicals; industrial products and contracting; financial services; and rail transportation through Adtranz, its 50-50 percent joint venture with Daimler-Benz AG of Germany.
Following the reorganization of its structure, the pro-forma 1997 figures for ABB's business segments are:

The ABB Group employs about 220,000 people in some 140 countries around the world and reported orders received in 1997 of US$ 34.8 billion and revenues of US$ 31.3 billion.

ABB Automation
Since September 1, 1998, all ABB automation activities are combined into the business segment Automation. Major product areas are control products and systems, instrumentation, analytical devices, meters, robotics, drives, motors and machines. Major industry lines served are utilities (electrical, gas, energy, water, etc.), pulp and paper, metals and minerals, marine, chemicals, pharmaceuticals, oil and gas, food and beverage, and manufacturing industries.

Elsag Bailey Group
Elsag Bailey is a leading global supplier of automation systems, products, and services for the process industries. Major product areas are control products and systems, instrumentation and analytical devices. Major industry lines served are utilities (electrical, gas, energy, water, etc.), pulp and paper, metals, chemicals, pharmaceuticals, oil and gas, food and beverage.
Elsag Bailey employs some 11,000 people in more than 30 countries around the world with a major presence in Germany, the U.S. and Italy. It reported orders received in 1997 of US$ 1,486 million and revenues of US$ 1,513 million.