Alstom Chooses GE

After nearly two months of wooing, General Electric (GE) is finally going to get what it wants.

On June 21, GE announced that the Alstom Board of Directors had chosen the GE offer to acquire the power and grid businesses over a separate offer proposed by Siemens and Mitsubishi Heavy Industries.

GE said the offer to acquire the Alstom businesses remained unchanged at $13.5 billion enterprise value and $3.4 billion of net cash. Once the deal closes—expected in 2015—GE and Alstom would form three joint ventures:

  • Grid: the combined grid assets of GE and Alstom.
  • Renewables: Alstom’s offshore wind and hydro businesses.
  • Global Nuclear and French Steam: Alstom’s production and servicing of equipment for nuclear power plants, and development and sales of new nuclear equipment around the world; and Alstom’s steam turbine equipment and servicing for applications in France.

Alstom’s cash investment in the joint ventures would be about $3.5 billion, making GE’s total net cash outlay for the transaction $10 billion, according to the company.

In addition to the joint ventures, GE will sell its signaling business to Alstom for roughly $825 million, and enter into multiple collaboration agreements involving services, technology, supply chain, manufacturing, and commercial support in the U.S.

One of the largest hurdles for GE was getting the French government onboard. The government recently gave itself the ability to block foreign acquisitions in the energy sector, if not deemed to be in the country’s best interest, and it had made it clear that GE’s first proposal would not be approved. However, French Economy Minister Arnaud Montebourg confirmed that authorization for foreign investment will be granted for the latest agreement. For its part, France will be able to purchase up to a 20% stake in Alstom from Bouygues SA, its largest shareholder, once the deal closes. The agreements for various alliances between GE, Alstom, and the government, including the Global Nuclear and French Steam Alliance still need to be executed.

Patrick Kron, chairman and CEO of Alstom, commented: “The combination of the very complementary energy businesses of Alstom and GE would create a stronger entity, best placed to serve customers globally, and invest in people and technology over the long run. Alstom would be associated to this ambitious combination through the energy alliances. Alstom Transport, a solid leader with a large portfolio of technologies and a worldwide presence in a dynamic market, would be further strengthened through the acquisition of GE’s signaling business as well as a far-reaching rail alliance with GE.”

“We will now move to the next phase of the Alstom alliance,” said Jeff Immelt, GE chairman and CEO. “We look forward to working with the Alstom team to make a globally competitive power and grid enterprise. We also look forward to working with the French government, employees, and shareholders of Alstom. As we have said, this is good for France, GE, and Alstom.”

Aaron Larson, associate editor (@AaronL_Power, @POWERmagazine)