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Analysis: Alstom plumps for GE deal

FRANCE: The tussle to take over Alstom's power business has seen GE emerge victorious after the French manufacturer's board voted unanimously to accept its offer.

Alstom's offshore business will fall under a 50:50 JV with GE
Alstom's offshore business will fall under a 50:50 JV with GE

GE's recently revised deal involves the creation of a 50:50 joint venture (JV) that will take in Alstom's offshore wind business along with its hydro division. However, the onshore wind business will fall under the sole control of GE.

In leaving elements of the business partly in French hands, the agreement meets one of the key demands of the French government, which has given itself new powers to be able to veto any takeover. The cash on offer remains unchanged from the original EUR 12.35 billion bid made in April.

While the government has now agreed to support the deal, after originally saying it would block the takeover if it was found to harm French interests, the offer must still be approved by workers' representatives and regulators.

The government plans to acquire a stake in Alstom by buying shares from main shareholder Bouygues. However, there is a dispute about the price that the government will pay for this.

Alstom's decision to accept the GE deal scuppers Siemens and MHI's bid to take over elements of the company's power business, which has now been officially rejected by the French firm.

Joint ventures

The GE deal creates three new 50:50 JVs, one of which is based on Alstom's offshore wind and hydro businesses. The others will be formed from a merger between GE and Alstom's grid businesses, with the last carved out of Alstom's nuclear and steam divisions.

The renewable energy JV will be based in France, and GE has committed to continue with Alstom's plans to build new facilities for offshore wind turbine manufacturing.

The exclusion of onshore wind from the joint venture, with the division being taken on in its entirety by GE, most likely reflects Alstom's lack of an onshore manufacturing base in France. As such, the French government would be less concerned about the business passing into foreign hands.

A move into offshore wind through the creation of a JV is something of a u-turn for GE, which in recent times has been vocal in its stance against a move into the offshore market, with vice president for renewables Anne McEntee saying it "does not make economic sense".

However, GE's willingness to keep the offshore division at arm's length in a joint venture, rather than taking on its running directly, may demonstrate the US company's ambivalence towards the sector.

A number of other concessions were made under the new offer put forward in June, with the French government being handed a minority stake in the nuclear and steam businesses and a veto power over certain decisions. The deal will also see GE sell its rail signalling business to Alstom in order to bolster the French firm's transport division.

Counter-offers

After the French government expressed concerns about the nature of GE's original offer, largely on the basis that it wrested control of the whole power division from French hands, Siemens stepped in to make a counter bid in May. This would have involved the German firm swapping parts of its rail business for the Alstom's power assets.

Earlier in June, MHI joined Siemens in its takeover attempt to put forward a revised bid that would have seen MHI take a 40% stake in Alstom's steam, grid and hydro businesses, while Siemens would take on the gas business. This offer would have left Alstom's wind division untouched, continuing to be owned by the French firm.

In response to Alstom's acceptance of GE's bid, Siemens CEO Joe Kaeser said that the company is "standing by" in case the deal falls at the final hurdle. "It's not over yet," he added, speaking to the German press.

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