Buyers line up for Alstom

30 April 2014

General Electric (GE) has submitted a binding $13.5 billion offer to acquire Alstom's power and grid businesses. Siemens has also said it intends to submit a bid for the French engineering company's energy business.

Alstom's board has given its unanimous support to GE's bid, and has set up a committee of independent directors to review the transaction. Boygues SA, which holds a 29% share of Alstom, has also pledged its support.

In a broadcast presentation to investors, GE chiefs explained the rationale behind their offer to acquire Alstom's energy businesses. Chairman and CEO Jeff Immelt described the transaction as a strategic move, playing to GE's strengths and improving its position in the global power and grid businesses.

According to Alstom, the transaction would bring together the two companies' complementary offerings in the power and grid areas across thermal, wind and hydro power, service provision and grid. For example, the companies already have complementary offerings in steam and gas turbine technology; Alstom will bring balance-of-plant and turnkey capabilities to the mix. Combining the two companies' energy activities would enable GE to bring in-house engineering, procurement and construction capability that currently it must out-source through collaboration with other suppliers. GE also anticipates gains from integrating the two companies' supply chains, service infrastructures, commercial reach and new product development activities.

Nuclear businesses

Although the information materials surrounding the transaction focus on the two companies' more general energy interests, both are major nuclear industry players. As well as reactor construction through the GE Hitachi alliance, GE Nuclear Energy offers a wide range of nuclear plant and fuel cycle services. Meanwhile, some 30% of the world's operating nuclear power plants are already equipped with generator sets supplied by Alstom.

Regarding areas of new build, Alstom cooperates with Dongfang Electric in China and has supplied turbine-generator sets to about half of the country's currently operating fleet, including the VVER units at Tianwan. This cooperation also covers the both the EPRs at Yangjiang as well as future AP1000s after the initial four. It also has a cooperation agreement with Shanghai Electric for the manufacture of boilers and steam generators. In Russia, Alstom's joint venture with Atomenergomash will see the pairing manufacture all the turbine-generator sets using the Arabelle technology for Rosatom's future nuclear plant projects. The first manufacturing for this began in the middle of last year.

Alstom Power claims that its portfolio of products covering all fuel types is the broadest in the world, while Alstom Grid is a major global player in electrical transmission. The sale of its energy businesses would enable the company, a world leader in railway engineering and services, to focus on its transport business. GE boasts a long history in France with interests in healthcare, aviation and capital services as well as the energy and water sectors, and has pledged that France will be the centre of its European power business.

Siemens steps up

GE says it expects to close the deal in 2015. Under the terms of GE's offer, Alstom may not solicit other offers for its energy business in the meantime, but it may respond to any unsolicited offers it receives.

Germany's Siemens has announced that it will also make an offer for Alstom, and is to carry out due diligence over the next four weeks as a prerequisite to such an offer. Alstom has promised that Siemens will have "fair access" to the information it will need to make an offer, and has promised to review Siemens' declaration in light of company and shareholder interest.

Alstom would face a "break-up" fee of 1.5% of the purchase price - over $200 million - if its board decides to support another transaction having already recommended GE's binding offer.

Researched and written
by World Nuclear News

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