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Hitachi has signed an agreement with ABB to acquire the firm’s power grids business.

The deal will result in Hitachi owning 80.1% stake in the Power Grids business. The purchase price of the 80.1% stake is approximately $6.4 billion. The business’ operating value is $11 billion.

The agreement includes an option for ABB to sell its remaining 19.9% holding three years after the deal is completed. Deal close is expected to be the first half of 2020. According to ABB, about $500 million in non-operating restructuring charges will be made in the next two years.

The deal is part of efforts by Hitachi to expand its offerings to global energy customers.

Hitachi will combine its digital technologies offering with ABB Power Grids’ advanced digital grid solutions to provide the industry with innovative solutions that will play a key role in the energy transition.

Hitachi will build an energy platform connecting various fields including mobility, life and industry with the aim to improve energy security, end energy poverty, improve consumer energy efficiency and grow its Social Innovation Business.

According to Bloomberg: “The acquisition will bolster Hitachi’s position in the growing power transmission and distribution sector, a market it estimated will grow to $100 billion by 2020 and benefit from demand for electric cars, storage batteries and renewable energies.”

ABB’s power grids division operates across four industry segments namely grid automation, grid integration, high voltage direct current (HVDC) systems, and high voltage products. ABB said it will now focus on four leading sectors and simplify its organisational structure and more detail is expected at the end of fourth quarter trading in February. It is believed, however, that ABB will use the opportunity to focus on its automation and robotics divisions.

Toshiaki Higashihara, CEO of Hitachi, said: “Today’s agreement between ABB and Hitachi is a significant turning point in the global power and energy markets at a time when digital technology is fundamentally changing our society and the pattern of energy demand and supply is diversifying.?

Ulrich Spiesshofer, CEO of ABB, added: “…ABB’s power grids business will strengthen Hitachi as a global leader. Our shareholders will directly benefit through the return of the proceeds of the divestment. Building on our existing partnership announced in 2014, the initial joint venture will provide continuity for customers and our global team.”

The two were offering electric companies in Japan with solutions reforming power systems via ABB’s HVDC division. To date, the HVDC division has implemented 120 projects and installed more than 13,000MW of energy capacity, half of the global installed base.