Deal watch: GE and Alstom to make energy alliances under revised deal


General Electric has beat rivals Siemens and Mitsubishi Heavy Industries to secure a deal to create energy alliances with Alstom’s grid and renewable power assets, Alstom has confirmed.

After months of negotiations with the French government, GE submitted a final offer to Alstom’s board of directors last week, which has been accepted and addresses state concerns about the breaking up of a French industrial heavyweight.

GE will acquire, as previously announced, the thermal power, renewable power and grid sectors, as well as corporate and shared services (the Energy Transaction) for a fixed and unchanged price representing an equity value of €12.35 billion and an enterprise value of €11.4 billion.

GE will then form joint venture energy companies with Alstom.

In grid, each company would hold a 50 per cent stake in a global business combining Alstom Grid and GE Digital Energy.

In renewables, each company would hold a 50 per cent stake in Alstom’s off-shore wind and hydro businesses.

Finally, GE proposes the creation of a global alliance in which GE would sell Alstom 100 per cent of its signalling business, with sales of around US$500 million in 2013 and 1,200 employees, and the companies would sign multiple collaboration agreements including a service agreement for GE locomotives outside of the US, research and development, sourcing and manufacturing and commercial support in the US.

Rival bids rejected

Siemens and Mitsubishi Heavy Industries (MHI) also submitted revised proposals last week.

Under the terms of its offer, Siemens would acquire Alstom’s gas business for an equity consideration of €4.3 billion, a €400 million improvement versus the initial proposal.

MHI would buy a 40 per cent equity stake in the combined steam, grid and hydro business of Alstom through one single holding company, for a consideration of €3.9 billion.

In addition, Siemens would offer to enter into an up to 50-50 joint venture with Alstom in signaling and mobility infrastructure.

After review, the board has unanimously determined that this proposal does not adequately address the interests of Alstom and of its stakeholders.

Regulatory steps

Completion of the GE transaction will be subject to works council consultation and merger control and other regulatory clearances, including French Foreign Investment authorisation.

In accordance with the AFEP-Medef code, the final approval of the transaction will be submitted to the shareholders.

Should this offer be approved and completed, Alstom would refocus on its fully owned transport activities and on its energy alliances with GE.

Alstom would use the proceeds of this transaction to strengthen its transport business, to invest in its energy alliances, to pay down its debt and return cash to its shareholders.

Patrick Kron, chairman and CEO of Alstom, commented: “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.

“Alstom would be associated to this ambitious combination through the energy alliances.

He added: “Alstom Transport, a solid leader with a large portfolio of technologies and a worldwide presence in a dynamic market, would be further strengthened through the acquisition of GE’s signalling business as well as a far-reaching rail alliance with GE.”

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