General Electric clears final French hurdle to clinch Alstom deal

Written by Agencies | New York | Updated: Jun 24 2014, 06:08am hrs
General Electric (GE) clinched its biggest acquisition ever, the $17-billion purchase of Alstoms energy assets, after the resolution of the French governments last condition for the deal.

Chief executive officer Jeffrey Immelt, approaching 13 years on the job, prevailed over a bid from Siemens and initial French opposition. Buying Alstoms gas-turbine operations and creating joint ventures in the steam turbine, renewable energy and electrical-transmission businesses will help his push to return GE to its industrial roots.

If this was hearts, Jeff shot the moon, said Nicholas Heymann, an analyst at William Blair & Co. in New York.

He got 90% of what he was shooting for, but he also made sure the business wasnt locked and inaccessible for life between the companys principal competitors.

The final hurdle was Sundays agreement by Alstom shareholder Bouygues to sell a 20% stake to the French state. Concerned that Alstoms divestitures would imperil French energy independence, Economy minister Arnaud Montebourg set the stock deal as a non-negotiable demand on June 20.

Adding Alstoms energy units will help Immelt, 58, tilt Fairfield, Connecticut-based GE back toward manufacturing after finance arm GE Capital put the parent company at risk as credit dried up during the 2008-09 financial crisis.

Meanwhile, Alstom chief executive Patrick Kron said on Monday France would make a sound investment by taking a stake in Alstom. He, however, added that the government would be buying in too late to have a say in the use of proceeds from its tie-up with GE.

I think they (the government) would make a good investment in Alstom. This is a company which has a strong potential of value creation and I'm expecting that all shareholders will benefit from this value creation, Kron told a call with analysts on Monday.

However, given the state will not be part of Alstom's capital nor on its board before the deal closes in roughly a year, it will not have its say on the use of proceeds from the transaction, he added.

Alstom will be reaping 12.35 billion euros ($16.9 billion) from the sale of its power assets to GE, but will have to re-invest about 2.5 billion euros into three 50:50 joint ventures created at the request of the government in its electricity grid, renewable energy and nuclear power businesses.