Alstom SA, the French maker of trains and power equipment, agreed to sell its steam auxiliary components unit to investment firm Triton for about 730 million euros ($1 billion) as it seeks to shore up its balance sheet.
The business, which makes air preheaters and gas-gas heaters for thermal power plants, heat transfer technology for petrochemical and industrial processes, and grinding mills, generated about 430 million euros in revenue and a “double-digit” operating margin in the fiscal year ended yesterday, the company said today in a statement.
“This transaction highlights the strength and value of Alstom portfolio of activities, and illustrates the group’s ability to deliver on its strategy of selective, value-enhancing disposals,” Alstom Chief Financial Officer Nicolas Tissot said in the statement.
Chief Executive Officer Patrick Kron outlined plans in November to cut costs and sell as much as 2 billion euros in assets, including a minority stake in Alstom’s rail division, by the end of 2014 to curb debt and regain “strategic mobility.” Alstom, based in the Paris suburb of Levallois-Perret, is responding to slowing demand for power plants and price pressure that’s hurting profit from onshore wind turbines and power-transmission gear.
The sale of the steam-components business is expected to be completed before the end of the first half of the fiscal year that started today, the French manufacturer said.
Alstom rose as much as 6 percent, the steepest intraday gain since Nov. 6, and was trading up 5.5 percent at 20.90 euros as of 9:03 a.m. in Paris. That pared the stock’s decline in the past year to 21 percent.
Alstom, which reduced its workforce in Europe and the U.S. as utilities’ demand for power equipment slumped after the 2009 recession, is cutting 1,300 jobs, mainly at its information-technology department and the boiler unit, to reduce costs by as much as 1.5 billion euros by April 2016. The French company is pushing for savings in Europe while investing in partnerships and plants in countries such as China, Russia, Brazil, India and South Africa to tap local demand for trains and turbines.
Moody’s Investors Service cut Alstom’s long-term credit rating by one level in June to Baa3, the lowest investment grade, and has said it may lower it further. Standard & Poor’s, which gives Alstom its second-lowest investment rating of BBB, has also said that it may downgrade the company’s debt.