GE to Weigh Concessions on Alstom Deal as EU Regulators Balk

Updated on

General Electric Co. said it’s ready to consider making concessions to win over the European Commission after the regulator sent it a list of competition concerns about its planned 12.4 billion-euro ($14 billion) acquisition of most of Alstom SA’s energy business.

GE and the commission both said that the filing doesn’t prejudge the final outcome of the deal review, and GE indicated it’s still “exploring potential remedies that would address concerns and preserve the deal economics.”

“We continue to have good discussions with the commission on the deal,” Jim Healy, a spokesman for GE in Paris said by phone after the European Union’s merger regulator sent the company a so-called statement of objections about the transaction.

GE has already signaled it’s open to limited concessions to win EU approval. Chief Executive Officer Jeffrey Immelt said last month that the company may consider selling some intellectual property around Alstom products but won’t sell anything tied to service revenue streams.

The EU’s list probably doesn’t include the deal’s value for Alstom or worker layoff concerns, especially after Immelt’s pledge to create 1,000 engineering and manufacturing jobs in France, said Nick Heymann, an analyst with William Blair & Co. in New York.

The acquisition bolsters GE’s transition back to an industrial company as it sells off its financial businesses, Heymann said. Still, GE won’t be willing “to give up the farm” to get the deal done, he said.

“Given how vitally important Jeff believes Alstom is to the reindustrialization of GE, you’re looking at a situation where GE has to roll up its sleeves and get through this in a financially prudent manner,” Heymann said.

Previous Concerns

The EU has previously raised concerns relating to the sale and servicing of heavy-duty gas turbines. The Brussels-based commission said the purchase may leave only Siemens AG as GE’s main rival in Europe, probably stifling innovation in the region and leading to price rises.

The Fairfield, Connecticut-based company is seeking to avoid a repeat of its failed bid for Honeywell International Inc., which was scuttled by EU regulators in 2001.

Immelt has made at least two trips to Brussels to discuss the Alstom deal with Margrethe Vestager, the EU’s competition commissioner, a person familiar with the matter said last month.

‘Standard Step’

“The sending of a statement of objections is a standard step in second phase investigations and does not prejudge the outcome of the investigation,” the commission said in an e-mail.

Alstom said ahead of the EU filing that it’s gearing up to address European concerns. The EU objections “will allow both General Electric and Alstom to address specific matters pointed out by the investigating team,” the French company said in a statement earlier on Friday.

The timing of the statement of objections would give GE and Alstom, based in the Paris suburb of Levallois-Perret, about two months to reach a compromise with the EU ahead of its Aug. 21 deadline to rule on the deal. Firms that get an SO can request an oral hearing to argue their case.

GE accounted for 51 percent of the global gas-turbine megawatt capacity ordered last year, according to data from Richmond, Virginia-based McCoy Power Reports. Siemens was second with 23 percent market share, followed by Mitsubishi Hitachi Power Systems Ltd.’s 13 percent share, while Alstom sold 7 percent and Ansaldo Energia SpA had 3 percent.