Abby L. Harvey
GHG Monitor
5/2/2014
GE this week submitted a $16.9 billion offer to purchase the thermal, renewables and grid businesses of Alstom. The offer consists of $13.5 billion enterprise value and $3.4 billion of net cash. Alstom’s board backs the deal, and has appointed a committee of directors to review the transaction. The review is expected to be completed by June 2. The proposed sale also needs to be approved by Alstom shareholders and regulators. The deal is expected to close in 2015.
In a statement announcing the bid, GE Chairman and CEO Jeff Immelt said, “This is a strategic transaction that furthers GE’s portfolio strategy. Power & Water is one of our higher growth and margin industrial segments and is core to the future of GE. Alstom, like GE, is a company built on engineering, innovation and technology. We respect and value the deep industry and technology expertise of Alstom employees and expect them to add to our proven track record of developing talent and leadership in France and globally.” He added, “Alstom not only advances our strategic priorities and industrial growth, but is also expected to provide an excellent return on capital. Alstom’s businesses are very complementary in technology, operations, and geography to our power and grid businesses. We expect a collaborative and prompt integration that will yield efficiencies in supply chain, service infrastructure, commercial reach, and new product development. We expect these actions will generate more than $1.2B in annual cost synergies by year five and the transaction will be immediately accretive for GE shareholders.”
Alstom said that if the deal is approved, it would “refocus” on its Transport activities. “Alstom would use the sale proceeds to strengthen its Transport business and give it the means of an ambitious development, pay down its debt and return cash to its shareholders,” a company release says. “The combination of the very complementary Energy businesses of Alstom and GE would create a more competitive entity to better service customer needs. Alstom’s employees would join a well-known, major global player, with the means to invest in people and technology to support worldwide energy customers over the long term. The proposed transaction would allow Alstom to develop its Transport business as a standalone company, with a strong balance sheet to capitalize on opportunities in the dynamic rail transport market,” Alstom CEO and Chairman Patrick Kron said in the release.
