PARIS (The Deal) -- France's Alstom on Wednesday gave its tentative approval to General Electric's (GE) binding $13.5 billion offer for its power unit but said a deal may have to wait until the end of May, leaving Siemens (SI) time to conduct due diligence and make a rival bid.
Fairfield, Conn.-based GE is offering a total $16.9 billion for Alstom's thermal power, renewables and grid operations, including the $3.4 billion of cash on the unit's books. Based on enterprise value, the deal prices the operations at 7.9 times pro forma Ebitda for the financial year ending September 2013, the U.S. bidder said.
GE's enterprise value and multiple was at odds with Alstom's calculations due to differences in the accounting of debt and cash at the unit. The French target calculated the offer at an enterprise value of 11.4 billion euros ($15.74 billion) and 12.2 times fiscal 2013 Ebitda, though it agreed with the total bid price of $16.9 billion.
"The combination of the very complementary energy businesses of Alstom and GE would create a more competitive entity to better service customer needs," Alstom CEO and chairman Patrick Kron said in a statement. "The proposed transaction would allow Alstom to develop its transport business as a standalone company, with a strong balance sheet."
GE said it expects the acquisition to deliver $1.2 billion in annual cost savings within five years and to add 8 cents to 10 cents to earnings per share in 2016.
Alstom said it would use proceeds from the sale to pay down its roughly 4.6 billion euros of debt, return cash to shareholders and invest in its rail unit. The sale would dramatically reduce the French engineering group's size, cleaving off the source of about 70% of its 20.3 billion euros of annual revenue.