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ABB Ltd. (ABB - Analyst Report) has agreed to divest its Baldor’s generator-set business to Generac Holdings Inc (GNRC - Snapshot Report). The two companies signed an agreement on Oct 8. The divestiture is expected to be completed by the fourth quarter of 2013. The financial terms of the deal were not disclosed. Following this divestiture news, ABB’s stock fell 1% and closed at $22.77 on Oct 9.

The decision to divest the generator-set business is a strategic decision by ABB, as this business was not part of the company’s core portfolio business. In fiscal 2012, this division contributed only 3% to the total revenue. The generator-set business was part of the acquisition of Baldor Electric by ABB in 2011.  

The divestiture is expected to be a win-win situation for both ABB’s Baldor Electric and Generac. Through the sale of the generator-set division, Baldor Electric will primarily focus on industrial electric motors and mechanical power transmission products, which are in line with ABB’s core portfolio. While for Generac, buying this generator biz will be beneficial as the company is primarily focused on the manufacturing, distribution and sales of this type of generator products.  

Generac is a leading designer and manufacturer of a wide range of generators and other engine-powered products. The company is one of the leading providers of power equipment and serves residential, light commercial, industrial and construction markets.

Recently, ABB completed various acquisitions to gain more focus on its core business, which include automation and power. Now this divestiture further emphasizes the company’s commitment to continuously optimize its portfolio.  

ABB, a global leader in power and automation technologies, currently carries a Zacks Rank #3 (Hold). Other stocks worth considering at the moment are Rexnord Corp. (RXN - Analyst Report) and Plug Power Inc (PLUG - Snapshot Report). Rexnord carries a Zacks Rank #1 (Strong Buy), while Plug Power carries a Zacks Rank #2 (Buy). 

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