Alstom's Board of Directors has unanimously decided to positively recommend GE’s revised offer to acquire the Power and Grid businesses of Alstom. With this decision, the transaction will proceed with Works Councils consultation, customary regulatory approvals and Alstom shareholder approval. The deal is expected to close in 2015.
GE Chairman and CEO Jeff Immelt said, “We will now move to the next phase of the Alstom alliance. We look forward to working with the Alstom team to make a globally competitive power and grid enterprise. We also look forward to working with the French government, employees and shareholders of Alstom. As we have said, this is good for France, GE and Alstom."
“For GE, the overall economics of the deal remain intact,” Immelt said. “This transaction remains accretive in year one.”
The French State has confirmed that, subject to execution of definitive agreements for the various alliances between GE, Alstom and the State, including the Global Nuclear & French Steam Alliance, and the State entering into an agreement to purchase shares in Alstom, it will grant the required foreign investment authorization.
GE’s offer to acquire the Power and Grid businesses of Alstom remains unchanged at $13.5 billion (€9.9 billion) enterprise value and $3.4 billion (€2.5 billion) of net cash, totaling $16.9 billion (€12.35 billion). The all-cash transaction is valued at 7.9 times pro forma earnings before interest, taxes, depreciation and amortization (EBITDA) of Alstom’s Thermal, Renewables, and Grid business units.
Under the terms of the updated offer, following completion of the Energy Transaction, Alstom and GE would establish joint ventures in Grid and Renewable Power.
In Grid, each company would hold a 50% stake in a global business combining Alstom Grid and GE Digital Energy. In Renewables, each company would hold a 50% stake in Alstom’s Off-shore Wind and Hydro businesses.
In addition, Alstom and GE would create a 50/50 Global Nuclear and French Steam alliance, which would include the production and servicing of the “Arabelle” steam turbine equipment for nuclear power plants, as well as Alstom’s steam turbine equipment and servicing for applications in France. In addition, the French State would hold a preferred share giving it veto and other governance rights over issues relating to security and nuclear plant technology in France.
The investment by Alstom in these Energy related alliances represents ca. €2.5bn, assuming these companies are debt-free, cash-free. The terms of these alliances include usual shareholders agreements with standard governance and liquidity rights.
Finally, GE proposes the creation of a global alliance in which GE would sell Alstom 100% of its signaling business, with sales of ca. US$500m in 2013 and 1,200 employees, and the companies would sign multiple collaboration agreements including a service agreement for GE locomotives outside of the United States, R&D, sourcing and manufacturing and commercial support in the United States.