COMMENTARY: GE Acquisition of French Energy Giant Alstom to have “Trickle Down” Synergies in Croatia and SEE
General Electric (GE) and French energy industry giant Alstom announced that GE submitted a binding offer to acquire Alstom’s Thermal, Power and Grid businesses consisting of €9.9 billion enterprise value and €2.5 billion of net cash, totalling €12.35 billion. With GE’s transition towards a focus on energy industry project, as opposed to its financial services business that experienced serious difficulties caused by the global financial crisis in the late 2000s, this acquisition would be a significant US acquisition and investment in the energy manufacturing industry on the European continent.
Alstom is present in Croatia with a turbine and turbine generator manufacturing facility in Karlovac with yearly revenues of approximately €60 million, employing approximately 800 persons. Along with Alstom’s recent bid with Japanese Marubeni for the €800 million coal-fired power plant Plomin C (see LPJ Weekly Top Headlines pg. 2), this acquisition will cause significant “trickle down” synergies in Croatia with the US global giant entering the energy manufacturing sector in Croatia and likely the whole Southeast Europe region in the coming years, especially when taking into account the EU/US geo-political strategy of diversifying energy production and exports to the EU.
Siemens Lobbying against Acquisition
The Alstom board of directors has positively received GE’s offer and has appointed a committee of independent directors led to review the transaction by June 2. If this review concludes positively, an exclusivity period beginning no later than June 2 will be granted and the next steps will include Works Councils consultation, Alstom shareholder approval in a shareholder meeting, and customary regulatory approvals. Bouygues S.A., a 29% non-controlling shareholder of Alstom, supports the transaction. Although the transaction involves the acquisition of Alstom’s Power and Grid businesses, GE’s offer, typical of a public company transaction, permits the board of Alstom to consider unsolicited alternative proposals for the acquisition of Alstom, or of the Power and Grid businesses. The deal is expected to close in 2015.
As is normal with such a large global acquisition, the initial acquisition discussions between GE and Alstom were strictly confidential, even towards their respective governments…