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EU Approves GE's Acquisition of Alstom

EC and DoJ decisions pave the way to complete GE’s largest-ever industrial acquisition

GE was informed yesterday that the European Commission has approved the proposed Alstom power and grid deal and that the Department of Justice has also filed a proposed consent decree that would permit the acquisition to close. These clearances pave the way for GE to complete the transaction as early as possible in the fourth quarter.

Jeff Immelt, GE Chairman and CEO, said, “We have addressed the EC’s and DOJ’s competition concerns while preserving the strategic and economic drivers of the deal. The complementary technology and geography of the Alstom assets will enable us to bring more value to customers and a strong return to GE shareholders.”

The EC’s approval is conditional on GE and Alstom fulfilling commitments given to the European Commission in connection with the clearance. Specifically, subject to regulatory approval, GE will divest to Ansaldo Energia, a supplier of power generation plants and components, a segment of Alstom’s heavy duty gas turbine business. This will include:

  • Alstom’s GT26 (an F-class gas turbine) product line for new unit sales
  • Alstom’s GT36 technology development program, which upon completion would result in an H-class gas turbine product.
  • Services contracts for 34 GT26 units. The remainder of Alstom’s gas turbine installed base (approximately 720 units) will remain with GE.
  • In addition, in order to address concerns raised by the DOJ and EC regarding competition for the service of GE gas turbines, GE will divest Alstom’s Power Systems Manufacturing (PSM) business, which provides after-market parts and services for other OEMs’ equipment. GE will receive a license to the PSM intellectual property used to offer after-market services for non-GE gas turbines.

GE is close to finalizing a deal to divest these assets to Ansaldo and that transaction would be expected to close after the closing of the GE/Alstom transaction, subject to required regulatory approvals.

GE reached an agreement with Alstom in April of 2014 to purchase Alstom’s power and grid businesses for €12.35 billion. Adjusting for the joint ventures announced in June 2014 (renewables, grid, and nuclear), changes in the deal structure, price adjustments for remedies, and net cash at close, the purchase price is expected to be approximately €8.5 billion (approximately $9.5 billion). The positive financial impact for GE remains unchanged. GE expects the deal to generate $0.05-0.08 of earnings per share in 2016 and $0.15-0.20 of earnings per share by 2018. GE is targeting $3.0 billion in cost synergies in year five and strong deal returns. Including the deal adjustments, the overall economics and strategic rationale remain the same as GE announced in April 2014.

Strategically, Alstom and GE’s power and grid technology and geography combined will enable many new opportunities to create value for customers, with:

  • Approximately 1,500 GW of installed base power generation, a 50% increase in GE’s current installed base.
  • One of the broadest and deepest renewables portfolio in the industry
  • Improved total thermal power plant design capability 
  • Broader grid portfolio with the footprint and scale to compete globally
  • Stronger and expanded capabilities to provide project expertise and financing for power projects
  • Big data and analytics to improve performance of the installed base
  • New ability to compete for other-OEM services
  • Local resources and global reach to power customers in more than 150 countries
  • Shared expertise and technology of the GE Store to drive growth

The Alstom alliance is another important step in the transformation of GE. GE remains ahead of schedule in its disposition of GE Capital. The company anticipates that the Synchrony split will occur this year, as was previously stated. In a slow growth and volatile environment, the team is executing well. In its second-quarter earnings announcement, GE raised its full-year Industrial operating earnings per share guidance to $1.13-1.20 and is on track for that goal.

“The more we learned about Alstom’s technology and capabilities over the last 15 months, the more we liked the deal,” said Immelt. “It’s the right deal at the right time for GE.”

“Navigating the global regulatory environment is more challenging than ever, including in the U.S.,” Immelt continued. “Throughout the regulatory process, we have worked constructively with the European Commission, the Department of Justice and other regulators around the world. The cooperation among the various agencies has enabled a thorough review of the transaction and we are happy to now have these important clearances that we need to proceed towards closing.”


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