By Anthony Capkun
June 23, 2014 – Alstom’s board of directors says it received an update to the offer from General Electric (GE) to acquire its power and grid businesses, as well as a revised proposal from Siemens and Mitsubishi Heavy Industries, and the board has unanimously decided to issue a positive recommendation of GE’s offer.
An ad hoc committee of independent directors—appointed by the board and led by Jean-Martin Folz—came to this conclusion citing satisfaction that the “productive exchanges established with the French State had resulted in a business proposal that not only addresses the interests of Alstom and of its stakeholders, but also provides assurances in connection with concerns expressed by the French State”.
Under the deal, GE would acquire the Thermal Power, Renewable Power and Grid Sectors, as well as corporate and shared services (the Energy Transaction), for a fixed and unchanged price representing an Equity Value of 12.35 billion euro and an Enterprise Value of 11.4 billion euro.
Under the terms of the updated offer and 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 Offshore 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.
Finally, GE proposes the creation of a global alliance in which GE would sell Alstom 100% of its signalling business, 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.
As for Siemens and Mitsubishi, the ad hoc committee felt their proposal did not “adequately address the interests of Alstom and of its stakeholders”.
Should GE’s offer be approved and completed, Alstom would refocus on its Transport activities and on its Energy alliances with GE. Alstom would use the proceeds of this transaction to strengthen its Transport business, invest in its Energy alliances, pay down its debt and return cash to its shareholders.