GE’s Immelt Sees No Honeywell Hangover in EU Alstom TalksTara Patel and Richard Clough
Jeffrey Immelt vanquished Siemens AG in the jockeying for Alstom SA’s energy assets and appeased French politicians. Now he’s looking ahead to the next obstacle: European regulators.
After weeks of talks with France on the $17 billion deal, General Electric Co.’s chief executive officer is sanguine in the face of European Union scrutiny. The regulator’s backing is key for GE, which saw its purchase of U.S. rival Honeywell International Inc. scuttled by EU opposition in 2001.
“Between Honeywell and today, we’ve had 80 deals approved in Brussels,” Immelt said yesterday 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’s success in negotiating with French officials over a local industrial icon contrasts with the failure to reach an accord with the EU in the planned acquisition of Morris Township, New Jersey-based Honeywell. Jack Welch, Immelt’s predecessor, refused to accede to concession demands from Mario Monti, then the EU’s competition commissioner, and months of bargaining proved fruitless.
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, the largest ever for Fairfield, Connecticut-based GE.
Immelt, 58, took 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 in the interview.
GE beat an offer from Siemens for the energy units of Alstom, the builder of the French electrical grid and the maker of the TGV high-speed trains. Immelt had to assuage French leaders whose opposition spurred 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 yesterday. “We were very clear with that with our board, we were very clear with that with the government.”
GE fell 0.4 percent to $26.58 at the close yesterday in New York as benchmark U.S. stock indexes declined. Alstom slid 0.3 percent to 26.78 euros in Paris.
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.
Immelt’s willingness to be flexible 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. 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.”