Power-One specialises in making “inverters”, which convert the direct current generated by solar cells into the alternating current needed by electricity grids.
ABB believes that demand for inverters will rise by 10 percent a year until 2021, due to rising energy demand, electricity prices and falling production costs.
The deal, set to be completed after the summer, requires shareholder approval. The $6.35 price per share agreed by ABB represents a 57 percent premium over the Nasdaq-listed Power-One's closing share price on Friday, although it is still well below the $13 level its shares traded at back in 2010.
The $1 billion total price tag is more than eight times the $120m in profit earned by the Californian company in 2012.
Power One will add $1 billion in annual inverter sales to ABB's current $100 million, as well as valuable research and development expertise and $266 million in cash on its balance sheet.
