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UPDATE 2-Cevian says ABB Power Grid spin-off would raise value for shareholders

(Adds comment by ABB main owner Investor AB)

By John Revill

ZURICH, Sept 13 ABB spinning off its Power Grids division as a separate business with its own share market listing would increase the value of investors' holdings by more than 60 percent, activist shareholder Cevian Capital said on Tuesday.

Cevian has been campaigning for a break-up of the Swiss engineering group, which it says is too complex and too difficult to run. It said spin-offs lead to a significant improvement in performance, while ABB's other businesses would not be harmed.

The Power Grids division, which supplies high voltage power cables and components used in offshore wind farms, had been a drag on ABB's overall performance but has improved its profitability in recent quarters amid falling sales.

"ABB should spin off and separately list its Power Grids division, which would create two great companies that would grow and thrive in the long term," a spokesman for Cevian said.

The two companies would have shares with a combined value of "at least 35 Swiss francs," the spokesman added.

Zurich-based ABB is due to give an update on its review of its Power Grids business next month. ABB's shares were up 0.5 percent at 21.70 Swiss francs on Tuesday, valuing the company at around 47.7 billion francs ($49 billion).

Cevian said it was sure a spin off would be greeted "enthusiastically by investors". Cevian is ABB's second biggest shareholder with a stake of 5.39 percent in the maker of power grids and industrial robots.

"To spin off and list Power Grids is the only rational and logical business decision," Cevian's founder and managing partner Christer Gardell told the Svenska Dagbladet newspaper in a separate interview.

"Big companies that consist of separate operations like ABB are bureaucratic, slow and ineffective."

A spokesman for ABB declined to comment on Cevian's comments. "As we have said all along, we will give an update on our strategic review of the Power Grids business at our Capital Markets Day on October 4," he said. " All options are being reviewed."

Biggest shareholder Investor AB said it was up to ABB's board to decide on the unit's future after completing the review.

"It is a process that Investor supports and we agree with the company's management and board the review should be awaited and analysed before a decision is taken by the board about the way forward," Investor spokesman Stefan Stern told Reuters in a reaction to the Cevian comments.

Analysts expect ABB to retain Power Grids, which generated sales of $11.6 billion in 2015, down from $12.5 billion a year earlier.

ABB Chief Executive Ulrich Spiesshofer also appears to be leaning towards keeping the division.

"What is clear is that the Power Grids division is global market leader in its segment," he told Swiss newspaper Handelszeitung in an interview last week.

Power Grids, which was created last year by a merger of ABB's power systems and power products business had been welcomed by customers, Spiesshofer said.

"Customers are now saying it is much easier to work with ABB. We are also seeing this in the growth of orders. In many areas we have gained some nice new orders," Spiesshofer said in the interview. ($1 = 0.9727 Swiss francs) (Reporting by John Revill and Oliver Hirt; Additional reporting Simon Johnson and Anna Ringstrom in Stockholm, editing by Louise Heavens)

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