ZURICH Swiss engineering group ABB ABBN.VX is to buy U.S. software company Ventyx for more than $1 billion, bolstering its position in the fast-growing area of renewable energy network management.
The deal, cash-rich ABB's first billion-dollar buy in more than 10 years, will also strengthen its presence in North America.
ABB, which had a cash pile of $7.1 billion at the end of the first quarter, has been looking for acquisition opportunities over the past few years and has taken a more conservative approach to buys, going for smaller deals.
This buy did not, however, mark the beginning of a spending spree at the group, a spokesman for ABB said on Wednesday.
"The advantage for our shareholders is a cash-generating acquisition in an exciting growth market, with a strong management team, a highly complementary offering and geographic scope, and an attractive return on capital employed," Chief Executive Joe Hogan said in a statement.
At midday, ABB shares were 0.2 percent lower, outperforming a 1.1 percent drop in the STOXX Europe 600 industrial goods and services index .SXNP.
Ventyx, which employs 900 people and posted 2009 revenue of about $250 million, is seen growing at a similar pace to ABB, which is aiming for sales growth of between 9 percent and 12 percent by 2012, the ABB spokesman said.
ABB is buying Ventyx from San Francisco-based private equity company Vista Equity Partners.
Ventyx was created in 2007, when Vista combined two companies -- Indus and MDSI -- that it had purchased. Vista paid $240 million for Indus in 2007 and $70 million for MDSI in 2005.
Ventyx provides software to utilities and grid operators, giving them the information they need to better match electricity generation with consumption, ABB said.
The real-time information on electricity demand, pricing and availability enables utilities to generate revenue from smart grids and carbon trading, ABB said.
Ventyx's software can also help to integrate large amounts of unpredictable renewable energies, such as wind and solar power.
"The company should fit well with ABB's power systems offering and appears very complementary. Ventyx addresses some key growth areas in network management, smart grids, renewables, etc," Kepler Capital Markets analyst Roger Steiner said.
But one Zurich-based trader said he thought the buy looked rather pricey at first glance.
"In the first moment I thought, that's too expensive but that's a software company in energy management and smart grids systems and I think they know this market and know the price for such companies," he said.
ABB, which sells power equipment to utilities as well as to oil and gas companies, said it expected the transaction to be completed in the second quarter.
ABB's last major deal was in 1998 when it bought Elsag Bailey in a deal worth $2.1 billion at the time.
(Additional reporting by Oliver Hirt in Zurich and Michael Erman in New York; Editing by Jon Loades-Carter)