Ge Alstom

Find our latest analyses and trade ideas on bsic.it

Alstom saga ends with a “ménage à trois”

General Electric; Market Cap: $299.6bn (as of 06/11/2015)

Alstom; Market Cap: $9.06bn (as of 06/11/2015)

Introduction

General Electric finally concluded its €9.7bn (about $10.6bn) acquisition of Alstom’s power business after getting the final

regulatory approvals. The deal represents GE’s biggest ever industrial acquisition.

GE's offer was accepted by Alstom at €12.35bn in April 2014, but then the French government rightfully forced some

changes in the deal structure. To win the approval from the French government, GE’s newest proposition involved setting

up joint ventures in renewable energy, electricity grid equipment and nuclear power. In fact, the value of the stakes Alstom

will own in the three joint ventures is estimated to be about €2.6bn which means that the net cash cost of the deal for GE

is about €9.7bn. Moreover, the US and European regulators required the sell-off of part of the GE’s turbine business to the

Italian Ansaldo Energia in order to keep the market competitive. Before GE got the “green light” from Paris, there was lot

of competition between GE and the joint offer of Siemens and Mitsubishi Heavy Industries for the acquisition of Alstom,

even though the board of Alstom favoured GE’s clear and simple offer. Moreover, GE promised to add about 1000 new

jobs in France, where it has had large existing operations for decades. On the other hand, the government liked the fact that

Mitsubishi-Siemens offer was based on forming a partnership and was not going to be a takeover. Finally, when GE

modified its proposal, it won the war.

About General Electric

General Electric, headquartered in Fairfield, Connecticut (US), is a multinational leading corporation with a highly

diversified business. General Electric is a key player in the Transportation, Marine, Energy and Mining industries but it also

has a solid presence in the Healthcare,...