Power transmission and industrial automation giant ABB Ltd. (ABB) Thursday threw in the towel in a bidding war over U.K. industrial company Chloride Group PLC (CHLD.LN), increasing the chances of success for a rival offer by Emerson Electric Co. (EMR) of the U.S.

Zurich-based ABB said it won't match Emerson's raised bid of 375 pence per Chloride share.

"While we still see considerable value in the combination of ABB and Chloride and have a high regard for the Chloride management team, we must take a disciplined approach when assessing potential acquisitions," ABB Chief Executive Officer Joe Hogan said.

Hogan, who has a reputation as a deal maker, joined two years ago from General Electric Co. (GE) after former CEO Fred Kindle was ousted after a row over ABB's strategy.

Emerson took the first shot at Chloride, which makes systems to protect customers from power surges or failures, at 275 pence some months ago, only to be trumped by ABB's 325 pence, or GBP860 million, bid in early June. Two days ago, Emerson sweetened its bid to 375 pence, or GBP997 million. Emerson has also agreed to pay Chloride shareholders the 3.3 pence dividend they were expecting.

Chloride, which originally supported the ABB counterbid, said Thursday it intends to enter into discussions with Emerson.

ABB standing back doesn't come as a surprise.

Many analysts have said the race for Chloride could result in an exaggerated takeover price.

ABB's Chief Financial Officer Michel Demare recently said ABB "knows its limits" regarding acquisitions.

"ABB has clearly communicated it would be disciplined, but people were worried anyway. They're now acting in line with what they have been promising, which is good," Zuercher Kantonalbank analyst Richard Frei said. "Chloride's customer base would have been nice to have but they aren't the undisputed leader in all the markets, and it's not ABB's core business," he noted.

Zuercher Kantonalbank has a market outperform rating on the share.

ABB shares were indicated to open 1.7% on the Swiss bourse after closing at CHF18.97 Wednesday. They have lost 6.1% so far this year.

ABB has recently stepped up its acquisition drive, spending more than $1 billion for Ventyx, an energy industry software company, and around $965 million for an increase in its Indian subsidiary, ABB Ltd. (India) (500002.BY) to 72% from 52%. It also bought U.S. measurement product maker K-TEK for an undisclosed price.

Company website: www.abb.com

-By Martin Gelnar, Dow Jones Newswires; +41 43 443 8042; martin.gelnar@dowjones.com
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