Today the European Commission approved GE’s proposed acquisition of the power and grid assets of the French industrial company Alstom.
Over the last year, GE, which makes everything from CT scanners to jet engines and power plant turbines, has been bulking up its industrial core, investing in software and connecting machines to the Industrial Internet, and selling its banking assets that once contributed more than a half of its revenues.
The company plans to add more big iron to its portfolio by acquiring Alstom’s businesses making power generation and grid equipment. GE estimates that by 2018, with an expected additional $0.15-$0.20 per share of earnings from Alstom, its industrial businesses will generate more than 90 percent of GE’s operating earnings, up from 58 percent in 2014.
GE first made its bid for Alstom’s assets public in April 2014. Over the last 15 months, the company has secured numerous regulatory approvals, yet still preserved the core of the deal: Alstom’s complementary technology and geographic reach, its 500 gigawatt installed base, and broad renewables and grid portfolios. “This deal is a critical step in GE’s transformation into the world’s premier industrial company,” said Jeff Immelt, GE chairman and CEO, in a comment on the decision.
Immelt said the approval gave GE a clear pathway to close the deal as early as possible in the fourth quarter. The company will work on finalizing the commitments associated with the proposed remedies, which include divesting a segment of Alstom’s gas turbine business and its after-market parts and services business (see more details here).
GE expects about $3 billion in cost synergies from the deal when the Alstom assets are fully integrated. “The more we learned about Alstom’s technology and capabilities over the last 15 months, the more we like the deal,” Immelt said. “It’s the right deal at the right time for GE.”
GE, which is quickly becoming a digital industrial company, will use big data and analytics to improve performance of Alstom’s installed base. Alstom’s expertise and technology will also enrich the GE Store, which allows know-how to quickly spread across GE businesses. The company will also gain local resources and reach power customers in more than 150 countries.
GE says the deal will give it access to one of the broadest and deepest renewables portfolios in the industry, allow it to improve total thermal power plant design, and provide it with a broader grid portfolio with the footprint and scale to compete globally. The company will also gain muscle in project expertise and financing for power projects.