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GE-Alstom acquisition to be finalized in early 2015
French power generation, power transmission and rail Infrastructure Company Alstom has accepted an offer by General Electric to buy its Power and Grid businesses for $16.9 billion (€12.35 billion). According to an estimation published by Corporate Counsel, the acquisition of Alstom's Power and Grid business by GE will however not be finalized until early 2015.
Having initially expressed concerns at the potential of losing domestic control over key assets, the French government granted its preliminary approval for the deal.
In an effort to improve their bid, GE also promised to create 1,000 new jobs in France over the next three years, focused in "high-value" areas such as manufacturing and engineering, a target which will be enforced financial penalties based on the analysis of an independent auditor.
These jobs will be in addition to Alstom's 18000 existing employees in its energy businesses and the commitments Alstom has made for offshore wind in France.
When asked about the successful deal, GE's chairman and CEO Jeff Immelt described it as "good for France, GE and Alstom".
"We will now move to the next phase of the Alstom alliance," Immelt said.
"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."
The French government still has to approve the acquisition, but is not expected to do so until its own purchase of 20 percent of stakes in Alstom is complete.
The deal between the two companies is expected to be signed in October once the council of Alstom workers has evaluated the arrangement.
"The GE/Alstom tie-up is of major impact to GE's footprint in Europe," NRGExpert Senior Analyst Edgar van der Meer told Power Transformer News.
"In what looks like what will be a successful acquisition, GE is securing one of the major European players in power equipment in Europe and certainly also a major player on the world stage. In order to remain competitive in this landscape, given the diverse characteristics of the grid landscape globally, consolidation will be the major driver of growth for companies active in this area."
If the offer is approved, Alstom has stated that it would refocus on its fully-owned Transport activities alongside its Energy alliances with GE, while the proceeds of the transaction would be used to strengthen its Transport business, to invest in its Energy alliances, to pay down its debt and return cash to its shareholders.
"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," explained Patrick Kron, Chairman and CEO of Alstom.
"Alstom would be associated to this ambitious combination through the Energy alliances."
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