Alstom Board votes to accept GE offer

23 June 2014


The Alstom board of directors has voted unanimously to accept a €12.35 bn offer from General Electric to acquire Alstom's energy business. It chose the deal over a rival bid from a consortium of Siemens and Mitsubishi Heavy Industries.
Under the terms of the bid already announced, GE would acquire Alstom's thermal power, renewable power and grid sectors, as well as corporate and shared services, for an equity value of €12.35 billion and an enterprise value of €11.4 billion. However, the terms of an updated offer (20 June) would also see Alstom and GE establish joint-ventures in grid, renewables and nuclear steam turbines, and proposes the sale of GE's signalling business to Alstom for €602 million.
In the grid sector, each company would hold a 50% stake in a global business combining Alstom Grid and GE Digital Energy, while GE would take a 50% stake in Alstom's hydro and offshore wind businesses. Alstom and GE would also create a 50/50 'Global Nuclear and French Steam' alliance. This alliance would include the production and servicing of the Arabelle steam turbine equipment for nuclear power plants, as well as Alstom's steam turbine equipment and servicing for applications in France. The French State would hold a preferred share giving it veto and other governance rights over issues relating to security and nuclear plant technology in France.
Finally, GE would sell Alstom its signalling business, and the companies would sign multiple collaboration agreements including a service agreement for GE locomotives outside the USA, R&D, sourcing and manufacturing and commercial support in the USA.
The board decided that an upated offer from Siemens and MHI 'did not 'adequately address the interests of Alstom and of its stakeholders'. Under the terms of the improved proposal, Siemens would acquire Alstom's gas business for €4.3bn and MHI offered to buy a 40 % stake in the combined steam, grid and hydro businesses for €3.9bn. In addition, Siemens would offer to enter into an up to 50/50 JV with Alstom in Signalling and Mobility Infrastructure.
Completion of the GE transaction is expected in 2015, subject to works council consultation, customary regulatory approvals and Alstom shareholder approval.
"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," commented Patrick Kron, chairman and CEO of Alstom.
"Alstom would be associated to this ambitious combination through the Energy alliances. 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."
Alstom says that should the offer be approved and completed, it would use the proceeds of the transaction to strengthen its transport business, to invest in its energy alliances, to pay down its debt and return cash to its shareholders.



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