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GE (NYSE:GE) and Alstom announced here today that GE has submitted a binding offer to acquire the Thermal, Renewables (“Power”) and Grid businesses of Alstom (ALO.PA) consisting of $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 Alstom board of directors has positively received GE’s offer and has appointed a committee of independent directors led by Jean-Martin Folz 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.
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. GE expects the acquisition to be accretive to earnings in the first year; it is expected to add $.08-$.10 of earnings in 2016; and approximately 75% of operating earnings is expected to come from GE Industrial by 2016.
Creating investor value
Jeff Immelt, GE Chairman and CEO, said, “This is a strategic transaction that furthers GE’s portfolio strategy. Power & Water is one of our higher growth and margin industrial segments and is core to the future of GE. Alstom, like GE, is a company built on engineering, innovation and technology. We respect and value the deep industry and technology expertise of Alstom employees and expect them to add to our proven track record of developing talent and leadership in France and globally.”