The completion on 2 November of GE's acquisition of Alstom's power and grid businesses has presaged a restructuring of GE's energy divisions. GE Power & Water and Alstom Power have been combined to form GE Power, GE Digital Energy and Alstom Grid have combined to form Grid Solutions, described as a GE and Alstom joint venture, while Ansaldo Energia is acquiring technology and other important Alstom assets from GE, a move necessitated under European monopolies law.
The completion of the Alstom transaction follows the regulatory approval of the deal in over 20 countries and regions including the EU, USA, China, India, Japan and Brazil. It is GE's largest-ever industrial acquisition. GE reached an agreement with Alstom in 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, net cash at close, and including the effects of currency, the purchase price is €9.7 bn (approximately $10.6 bn). GE is targeting $3.0 billion in cost synergies in year five and strong deal returns. The overall economics and strategic rationale are unchanged from those announced in April 2014.
"The completion of the Alstom power and grid acquisition is another significant step in GE's transformation," said Jeff Immelt, chairman and CEO, GE. "The complementary technology, global capability, installed base, and talent of Alstom will further our core industrial growth. We are open for business and ready to deliver one of the most comprehensive technology offerings in the energy sector for our customers."
The effect on existing Alstom entities will be determined by their complete absorption into GE and they will function as GE businesses, but the company would not be drawn on the policy for overlapping product areas, such as steam turbines and condensers where they have been direct competitors, saying only that they 'are now part of GE Power and will fulfill all existing contracts, and continue securing more business with customers for our wider offerings".
There was some controversy in 2014 over which company would be liable for $772 million in fines that Alstom agreed to in the USA to settle bribery charges in 2014. Each side apparently thought the other was liable. GE says that Alstom has settled and paid that fine, and that GE considered the DoJ investigation and its potential liabilities in its due diligence, and it did not change the overall economics of the deal.
With the completion of this acquisition, GE Power & Water and Alstom Power have combined to form GE Power. It will be headquartered in Schenectady, New York State, and will have more than 65 000 employees in over 150 countries with estimated revenue of $30 billion. The comprising businesses will consist of Power Services headquartered in Baden, Switzerland, Gas Power Systems headquartered in Schenectady, Steam Power Systems headquartered in Baden, Switzerland, Distributed Power headquartered in Jenbach, Austria, GE Hitachi Nuclear Energy headquartered in Wilmington, North Carolina, Water & Process Technologies headquartered in Trevose, Pennsylvania.
On the T&D side GE Digital Energy and Alstom Grid have combined to form Grid Solutions, a GE and Alstom joint venture. Together they currently equip 90% of power utilities worldwide with estimated revenues of approximately $6.2 bn. The JV has more than 20 000 employees in 80 countries.
Italian company Ansaldo Energia will acquire technology and other Alstom assets from GE, allowing the company to increase its turnover twofold in the coming five years, and to become something of a force in the gas turbine sector. Ansaldo has for some years been licensed to manufacture certain GE GT ranges.
Ansaldo Energia, in which Fondo Strategico Italiano and Shanghai Electric hold stakes of 44.8% and 40% respectively, acquires several of Alstom's assets including all Alstom's heavy duty gas turbine intellectual property rights for the latest ratings of the GT26 and GT36 turbines, existing upgrades and pipeline technology for future upgrades and its intellectual property related to Siemens-Mitsubishi gas turbines. This deal is expected to close early in 2016 following receipt of required regulatory approvals.
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