Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

GE clears final hurdle to 9.10 billion pound Alstom deal

Published 08/09/2015, 19:07
Updated 08/09/2015, 19:07
© Reuters. The logo of US conglomerate General Electric is pictured at the company's site in Belfort

© Reuters. The logo of US conglomerate General Electric is pictured at the company's site in Belfort

By Foo Yun Chee

BRUSSELS (Reuters) - General Electric (NYSE:GE) has won EU approval for its 12.4-billion-euro (9.10 billion pound) acquisition of Alstom's power business after agreeing to sell some of the French company's turbine assets to Italian rival Ansaldo Energia.

EU officials said the concessions allayed concerns that the deal would reduce competition in the European market for heavy-duty gas turbines to two major players, namely the merged company and Germany's Siemens, potentially leading to higher prices and pushing up the cost of electricity.

The U.S. conglomerate's acquisition of Alstom's energy business - its largest deal ever - will bring together two of the world's biggest manufacturers of power plant hardware and is crucial to GE's plans to increase its focus on industrial operations and shift away from finance.

The EU decision, as well as creating a major new player in the sector in Ansaldo, will allow GE to press ahead with a cost-cutting programme. It told investors in May it expects $3 billion in cost reductions over the next five years as it combines its operations with those of Alstom (PARIS:ALSO).

The deal has been approved by regulators elsewhere, including in the United States on Tuesday. But overcoming the European hurdle will nevertheless come as a relief to GE, as EU officials stymied its $42 billion offer for Honeywell International 14 years ago despite U.S. clearance.

Both Alstom and GE said they expected to finalise the deal as early as possible in the fourth quarter.

The head of GE's Power & Water division described the acquisition as a "transformational deal" as GE focuses more on big-ticket industrial products.

Alstom comes with about 500 gigawatts of installed power around the world, while it has taken GE "since the days of Thomas Edison" to build up its 1,000 gigawatts of installed power generation, Steve Bolze said in an interview.

CONCESSIONS

Under GE's concessions, it will divest Alstom's heavy-duty turbine product line and the technology it is developing for very large turbines to Ansaldo, of which Italian state-backed investment fund Fondo Strategico Italiano and China's Shanghai Electric each own 40 percent.

The U.S. conglomerate will also sell Alstom's service contracts for 34 installed turbines and its U.S.-based subsidiary Power System Manufacturing to Ansaldo.

European Competition Commissioner Margrethe Vestager said Ansaldo was already an established player in the heavy-duty gas turbine market and, with the addition of Alstom's assets, would be able to replace Alstom's role in the market.

Kepler Cheuvreux analyst William Mackie said Ansaldo had been given the means to become a significant player along GE and Siemens as it was "going to be offered some of the latest technology - in the GT26 and GT36 - in and around large gas turbines".

Credit Suisse (SIX:CSGN) analysts said the GE concessions were also positive for Shanghai Electric, as through Ansaldo acquiring Alstom assets it would gain a strong footing in the European and the U.S. gas turbine market.

"Traditionally the Chinese thermal equipment manufacturers have had very limited gas turbine technology," they added.

Vestager pointed to the cordial ties with her U.S. counterparts working on the case, contrasting it with the turmoil when the Commission blocked GE's Honeywell deal.

"We have gone a very, very long way with transatlantic cooperation since GE tried to acquire Honeywell at the beginning of the millennium. Things have changed."

Reuters reported on Aug. 14 that the GE-Alstom deal would be approved with conditions.

© Reuters. The logo of US conglomerate General Electric is pictured at the company's site in Belfort

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.