Alstom Accepts GE’s Updated Offer

June 23, 2014

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Alstom’s board of directors accepted GE’s updated offer to acquire the power and grid businesses of the French industrial group for $13.5 billion (€12.35 billion) on Saturday. The deal includes three joint-ventures: in grid technology, renewable energy, and global nuclear power and French steam power.

The acquisition, the largest in GE’s history, will create 1,000 new jobs in France, preserve local decision making, provide the French government with access to nuclear steam turbine technology and support Alstom’s train signaling business.

“We will now move to the next phase of the Alstom alliance,” Jeff Immelt, GE chairman and CEO said in a statement. “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.”

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Alstom CEO Patrick Kron (left), French Minister of Economy Arnaud Montebourg (center) and Jeff Immelt, GE chairman and CEO, at the signing of the acquisition on Saturday.

Immelt said the acquisition preserved the value of the original April 30 offer for investors. “Our synergies remain intact. It is immediately accretive to our earnings, furthers the transition of our portfolio towards industrial businesses, and broadens our product and service offerings for customers,” he said.

The joint ventures will lower GE’s projected earnings per share from the transaction by approximately $0.01-$0.02 per year. EPS from the deal was initially projected at $0.08-$0.10 per year. Overall, GE still expects $1.2 billion in synergies from the transaction by year five. 

“If this was Hearts, Jeff shot the moon,” said Nicholas Heymann, an analyst at William Blair & Co., told Bloomberg. “He got 90 percent of what he was shooting for, but he also made sure the business wasn’t locked and inaccessible for life between the company’s principal competitors.”

Alstom and GE will continue operating as two separate companies until the acquisition closes in 2015.

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Under the new structure, GE will acquire the power and grid businesses of Alstom, as previously announced on April 30. Once closed, GE and Alstom would form three joint ventures.

One will create a global grid business based in France by combining GE’s and Alstom’s grid assets. The second will form a renewable energy company based in France, consisting of Alstom’s offshore wind and hydroelectric units.

GE and Alstom will also create a 50/50 global nuclear and French steam alliance,  with the French government holding a preferred share giving it veto and other governance rights, to assure the security and growth of nuclear steam technology for France. This will include Alstom’s equipment for nuclear power plants around the world, and Alstom’s steam turbines in France.

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In addition, the intellectual property related to Alstom’s Arabelle nuclear steam turbine technology will be transferred to a special purpose vehicle wholly owned by the French government, which will allow the government to license the technology to third parties if GE were not to supply Arabelle technology to an EDF/Areva nuclear project.

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GE has also made a long-term commitment to ongoing development of the Arabelle technology and servicing of the EDF installed nuclear base.

GE and Alstom have also signed a memorandum of understanding to create a global alliance in transportation, and GE will sell its rail signaling business to Alstom.

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Finally, GE has committed to create 1,000 new jobs in France over the next three years. They will be located in high-value areas such as manufacturing and engineering. This goal will be enforced through an independent auditor and financial penalties.

The grid, offshore wind, hydroelectric, and steam turbines businesses will have headquarters in France. GE’s European power headquarters have been in Belfort since 1999.

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GIF Sequence: Made in France: GE manufactured the world’s largest and most efficient gas turbine, the 9HA, at its plant in Belfort, France. The turbine recently traveled by truck, ship, boat, and rail to GE Power & Water’s plant in Greenville, South Carolina, for a year of rigorous testing. 

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