General Electric secures Alstom deal

After months of wrangling, General Electric’s proposed €12.4bn acquisition of French energy firm Alstom has been given the green light by the European Commission – which formally announced its approval at a press conference held on September 8.

The decision to acquire Alstom is part of GE’s strategy to refocus the business on industrial units and move away from financial services

European anti-trust regulators had expressed concerns that the merger would damage competition and lead to market distortions for gas turbines. The EU also demanded assurance from GE that it would not raise its prices for gas turbines if the acquisition went ahead. The deal was accepted after eight months of discussions and a series of concessions promised by GE. One clause in the agreement includes the sale of some of GE’s maintenance assets and patents to Italian rival Ansaldo Energia.

The decision to acquire Alstom is part of GE’s strategy to refocus the business on industrial units and move away from financial services. Alstom will enable GE to increase its industrial business profits from 50 to 90 percent of its annual revenue. Moreover, according to Forbes, GE expects cost savings of around $3bn from the merger, around 40 percent of which will result from shared general and administrative expenses.

In line with its new industrial business model, GE also tried to sell its appliances arm to Electrolux for $3.3bn earlier this year. However, the deal was brought to a halt following a lawsuit that was filed by the US, again due to concerns about market competition.

In 2001, EU regulators blocked GE’s acquisition of Honeywell International for $45bn to the outage of US executives. GE pushed hard to prevent history from repeating itself, ensuring that the investigation continues, with two extensions granted earlier this year. Some experts argue that a softer approach and the offer of significant concessions led to GE’s success this time around.