General Electric has beaten out Siemens and Mitsubishi with its plan to acquire the energy businesses of Alstom, according to the latest reports on the months-long negotiations over the fate of the French grid giant.
But GE’s win comes with significant changes to meet the French government’s concerns about losing a key national industrial player to U.S. ownership. Rather than its original $13 billion cash offer to buy Alstom’s power turbine and grid business units, GE’s new plan is being called an “alliance,” in which it will set up joint ventures in grid, nuclear and renewable energy.
French Economy Minister Arnaud Montebourg announced Friday that it had accepted GE’s new offer, and rejected a counter-offer from Siemens and Mitsubishi. Siemens in April offered a cash and asset-swap deal valuing Alstom at €10 billion to €11 billion ($13.8 billion to $15.2 billion), and Mitsubishi later joined the German grid giant with its own €3.1 billion ($4.2 billion) stake.
But the French government appears to have picked a bid that offers less cash in exchange for more control over the outcome, enabled by a law passed last month that gave the government discretion to block corporate acquisitions in strategic industries, including energy and transportation. Alstom, one of the world’s biggest power generation and transmission equipment makers, is also the builder of France’s TGV high-speed trains.
GE has agreed to sell its rail signaling business to Alstom to strengthen its transportation business, at a value that Montebourg put at “1 billion dollars or euros, I am not sure,” according to reports from Friday’s press conference. It would take over Alstom’s gas turbine business, the world’s third-largest behind GE and Siemens, and create joint ventures in its wind turbine business, where Alstom lags its competitors, and in its transmission grid equipment business, where Alstom ranks third behind Siemens and ABB in global market share.
Alstom is also a major player in grid technology, ranging from substation automation systems to distribution grid control and asset management software. On the smart grid technology front, Alstom has been taking steps to expand its role, working with Cisco and Itron to network its substation systems via wireless IPv6 technology and joining Duke Energy’s “Coalition of the Willing” to integrate its field equipment with open-standards-based technology.
The new GE proposal also includes guarantees of “energy independence, job creation on national territory, and maintenance of decision-making centers in France,” Montebourg told reporters Friday. The French government will also buy a 20-percent stake in Alstom from Bouygues, the conglomerate that now owns 29 percent of the company, he said. Alstom’s board of directors announced Saturday that it had unanimously approved GE’s offer.
GE was always the favored bidder from the perspective of Alstom and its shareholders, industry analysts have been noting throughout the three-month bidding war for Alstom. This weekend’s news appears to have settled whether it will now have a stake in one of Europe’s premiere energy companies, while opening up the question of just how the two industrial giants will negotiate their merger-slash-alliance.