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What you need to know for 01/20/2017

GE bids for French foe

GE bids for French foe

An offer by General Electric to acquire French conglomerate Alstom’s nearly $17 billion power and gr
GE bids for French foe
Workers gather in front of the Alstom company headquarters, the leading global maker of high-speed trains, power plants and grids, in Levallois-Perret, outside Paris, on Wednesday. French engineering firm Alstom SA said Wednesday it was ready to accept...
Photographer: The Associated Press

An offer by General Electric to acquire French conglomerate Alstom’s nearly $17 billion power and grid businesses would not affect GE’s operations in Schenectady, a company spokeswoman said.

Nevertheless, speculation swirled Wednesday that it would, after GE Chairman and CEO Jeff Immelt said France would be the center of its European power business, with headquarters and “Centers of Excellence” for its steam turbine, hydro, offshore wind and grid businesses. Schenectady is currently home to much of GE’s steam turbine manufacturing operations and is headquarters for the company’s wind business.

“The announcement today has no impact on the Schenectady site,” said GE spokeswoman Chris Horne in an email. “It’s about continuing to build the most competitive products and creating value for our customers around the world.”

After a week of rumors, GE announced Wednesday it had submitted a binding offer to acquire the thermal, power and grid businesses of Alstom. The $13.5 billion deal, if approved, would be the largest ever for GE.

The Alstom board of directors has “positively received” GE’s offer and has appointed a committee of independent directors to review the transaction by June 2, a GE news release said. The French conglomerate can still consider unsolicited alternative proposals, though, leaving the door open for German giant Siemens to submit a rival offer.

The potential takeover of Alstom’s energy business has been politically charged from the start. The company, which apparently symbolizes France’s industrial might, received a multibillion-dollar bailout from the government a decade ago. As demand for its gas and steam turbines continues to fall, the deal with GE would allow Alstom to rid itself of a weak spot and turn its attention to its Transport business, which manufactures the country’s high-speed trains. But the government is concerned a takeover could mean mass layoffs.

However, GE said in a news release Wednesday that in addition to making France the center of its European power business, it anticipates net growth in jobs there, with an employee mix shifting toward high-value manufacturing and engineering jobs. The Wall Street Journal reported the same day that this was offered up to “make the deal palatable to French politicians.”

GE previously acquired Alstom’s gas turbine business in 1999. Belfort, France, is currently a Center of Excellence for GE’s 50 Hz gas turbine model.

“This is a strategic transaction that furthers GE’s portfolio strategy,” Immelt said in the release. “Power & Water is one of our higher growth and margin industrial segments and is core to the future of GE. Alstom, like GE, is a company built on engineering, innovation and technology. We respect and value the deep industry and technology expertise of Alstom employees and expect them to add to our proven track record of developing talent and leadership in France and globally.”

Alstom employs 93,000 people. Its energy business, which employs 65,000, had revenue last year of $20.4 billion.

The business is “very complementary in technology, operations and geography” to GE’s power and grid businesses, Immelt said. A merger would create efficiencies in supply chain, service infrastructure, commercial reach and new product development, GE said. Five years into a merger, GE expects more than $1.2 billion in savings in operating costs across the combined businesses.

“The combination of the very complementary energy businesses of Alstom and GE would create a more competitive entity to better service customer needs,” said Alstom CEO Patrick Kron in the release. “Alstom’s employees would join a well-known, major global player, with the means to invest in people and technology to support worldwide energy customers over the long term.”

A deal wouldn’t close until next year, as it requires Alstom shareholder approval and customary regulatory approvals.

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