EU Approves GE's Acquisition of Alstom's Energy Business -- 2nd Update
September 08 2015 - 12:58PM
Dow Jones News
By Tom Fairless
BRUSSELS-- General Electric Co. secured approval from Europe's
top antitrust authority for its acquisition of Alstom's power
business on Tuesday after agreeing to sell assets to an Italian
rival that regulators hope will become a strong new competitor in
Europe.
The European Union's approval, which follows eight months of
tough negotiations, puts GE on the brink of closing its biggest
ever deal. U.S. authorities also signaled their approval on
Tuesday, joining around 20 other global regulators that have
already given the green light.
In Brussels, regulators had pored over the deal for months amid
concerns that it would lead to higher prices in Europe for large
gas turbines. "There was a great risk of choice going down and
prices going up," Margrethe Vestager, the EU's antitrust chief,
said at a news conference.
To assuage those concerns, GE agreed to sell "central parts" of
Alstom's large gas turbines business to Ansaldo Energia of Italy,
the EU said. Those divestments, the regulator said, will allow
Ansaldo "to replicate Alstom's previous role in the market, thereby
maintaining effective competition."
Despite the asset sales, Jeff Immelt, GE's Chief Executive
Officer, said the "strategic and economic drivers of the deal" had
been preserved. He said the deal would close "as early as possible
in the fourth quarter."
When it was announced more than a year ago, GE valued the deal
at EUR12.35 billion ($13.7 billion). However, that has fallen to
around EUR8.5 billion, reflecting the impact of joint energy
ventures announced last year, changes in the deal structure, price
adjustments for the remedies and net cash at close, GE said.
Under the agreement with Brussels, GE agreed to divest Alstom's
technology for two models of large gas turbines, as well as "a
large number" of Alstom's turbine-research engineers, two test
facilities in Switzerland, and Alstom's Florida-based servicing
business.
GE already manufactures gas turbines of corresponding size to
the two Alstom models, and the company says it will retain licenses
that will enable it to compete for business servicing turbines made
by other manufacturers -- an opportunity for future earnings
growth.
The U.S. company will also divest the long-term servicing
contracts for 34 turbines that have already been installed by
Alstom. GE has said that Alstom's servicing contracts were a key
attraction of the deal, but a person close to the deal said the
divested contracts amounted to only 4% of Alstom's total installed
base.
"I am glad that we can approve this transaction, which shows
that Europe is open for business and that Europe-based technology
can thrive and attract foreign investment," Ms. Vestager said.
U.S. antitrust authorities, working in concert with Brussels,
said they would require GE to divest the Florida-based servicing
business.
The EU must sign off on the asset transfers before the deal can
go ahead, Ms. Vestager said. GE has secured a EUR300 million rebate
from Alstom for the remedies.
Steve Bolze, chief executive of GE's power business, said the
deal would be "transformative" for the company's power business,
expanding the number of installed turbines it services by 50% in a
single shot. GE will aim to achieve $3 billion of annual cost
synergies at the combined business after five years, he said.
Ted Mann contributed to this article.
Write to Tom Fairless at tom.fairless@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 08, 2015 12:43 ET (16:43 GMT)
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