General Electric Alstom offer approved by board and French government
The General Electric Alstom offer was unanimously approved by the Alstom board to buy the French company’s Power and Grid businesses. If approved by Alstom workers representatives, shareholders and regulators, which seems likely, the deal will go through.
General Electric (GE), the US multinational conglomerate headquartered in Fairfield, Connecticut, has offered $16.9 billion (€12.35 billion) for Alstom’s energy business.
French government approves
The French government, which will buy a 20% stake in the French multinational, has also agreed to back the offer. The government plans to buy Alstom shares from Bouygues, the main shareholder. Boygues is demanding a price of €35, but the government is pushing for the market price of €28.
The French government, which intervened in the negotiations in April, had asked for assurances that the jobs of the approximately 18,000 Alstom employees in France would be safeguarded.
A Siemens Mitsubishi sweetened bid of €8.2 billion ($11.2 billion) was turned down.
The deal is expected to be completed next year. If approved, it will be General Electric’s largest ever takeover.
General Electric Chairman and CEO Jeff Immelt said today:
“We will now move to the next phase of the Alstom alliance. 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. For GE, the overall economics of the deal remain intact. This transaction remains accretive in year one.”
Details of the deal
GE buys Alstom’s Power and Grid businesses for $13.5 billion (€9.9 billion) and net cash of $3.4 billion (€2.5 billion), i.e. a total of $16.9 billion (€12.35 billion).
As soon as the transaction is completed, Alstom and GE will enter into three joint ventures:
- Grid: the combined grid assets of Alstom and GE,
- Renewables: Alstom’s Hydro and off-shore businesses,
- Global Nuclear and French Steam: Alstom’s production and servicing of equipment for nuclear power stations, and development and sales of new atomic power equipment worldwide; as well as Alstom’s steam turbine equipment and servicing for applications within France.
GE total outlay $10 billion – Alstom’s cumulative cash investment in the three joint ventures will total approximately $3.5 billion (€2.6 billion). General Electric’s total outlay for the transaction, including Alstom’s purchase, is $10 billion (€7.3 billion). Outlay means how much is spent on something.
GE has signed a MoU (memorandum of understanding) to sell its signaling business to the French company for about $825 million (€602).
GE wrote in a press release today:
“GE maintains its synergies target of $1.2 billion annually by year five. GE expects the deal to be accretive to earnings in the first year. The joint ventures will lower GE’s projected earnings from the transaction by approximately $0.01-$0.02 per year.”