GE’s Immelt Confident on Alstom Deal After Honeywell Loss
After tussling with French government officials, Jeffrey Immelt said he is confident General Electric Co. (GE)’s $17 billion deal for Alstom SA (ALO)’s energy assets will win approval from European regulators.
GE is preparing now for scrutiny from the European Union, the U.S. company’s chief executive officer said today. That’s a pivotal step, because EU opposition helped scuttle GE’s attempted purchase of U.S. competitor Honeywell International Inc. (HON) in 2001.
“Between Honeywell and today, we’ve had 80 deals approved in Brussels,” Immelt said in an interview at GE’s gas-turbine plant in Belfort in northeastern France. “We know the process. I very much trust that the process will be fair.”
GE beat an offer from Siemens AG for the energy units of Alstom, an industrial icon in its home country for its prowess in building the French electrical grid and making the TGV high-speed trains. Immelt had to assuage French political leaders whose opposition spurred Fairfield, Connecticut-based GE to sweeten its initial offer without changing the valuation.
“Economically, we just weren’t going to budge,” said Immelt, who also joined Alstom CEO Patrick Kron on a visit to the French company’s factory in Belfort today. “We were very clear with that with our board, we were very clear with that with the government.”
GE is acquiring Alstom’s gas-turbine unit and creating joint ventures in the steam-turbine, renewable-energy and electrical-transmission businesses while selling its rail-signaling operations to Alstom. GE said it expects to close the deal in 2015.
The U.S. company’s revised proposal included alliances in nuclear technology and rail, and offered safeguards to GE’s pledge to create 1,000 local industrial jobs. As part of the deal, the French state will buy as much as 20 percent of Alstom, which is based in the Paris suburb of Levallois-Perret.
GE fell 0.4 percent to $26.58 at the close in New York as benchmark U.S. stock indexes declined. Alstom slid 0.3 percent to 26.78 euros in Paris.
GE’s preliminary success in Europe contrasts with the failure of its quest to buy Morris Township, New Jersey-based Honeywell for $53 billion last decade. The deal collapsed after Jack Welch, Immelt’s predecessor as CEO, refused to accede to concession demands from Mario Monti, then the EU’s competition commissioner.
Monti’s demands “exceeded anything I or our European advisers imagined,” Welch said at the time. He declined through his assistant to comment on the Alstom transaction.
Immelt has taken a more conciliatory approach than Welch did, said Christian Mayes, an Edward Jones & Co. analyst based in Des Peres, Missouri. After GE’s offer was announced April 30, Immelt met several times with French officials and made a rare appearance by a U.S. CEO before France’s National Assembly.
“I think the whole failed Honeywell bid is still on his mind,” said Mayes, who rates GE as hold. “He realized that in order to clinch the deal they may need to be flexible here. He attended a lot of the high-profile meetings and was in France a lot.”
Immelt said a willingness to compromise is critical for GE’s ability to get deals done. “Look, if you don’t have an open mind in the world today, you’re lost,” he said.
That trait was tested in the discussions with France. After GE made its formal offer for the Alstom assets, Economy Minister Arnaud Montebourg led local political criticism of the deal, tightened French rules against corporate takeovers and urged Munich-based Siemens to bid. Those moves set the stage for GE’s updated proposal.
Montebourg is “a good negotiator,” said Immelt, 58. The CEO, who took the job four days before the Sept. 11 attacks in 2001, said he wasn’t discouraged when GE and the government clashed.
“I’ve run the company for 13 years, through the financial crisis, after 9/11,” Immelt said. “I’ve seen much worse times than the last eight weeks in France.”