Investors weigh good news/bad news nature of GE's bid for Alstom assets

|By:, SA News Editor

GE (GE -0.4%) shares have gained just 1.7% since the news first broke that it was considering a bid for Alstom (ALSMY, AOMFF) energy assets, perhaps reflecting the good news/bad news nature of a potential deal, according to Morgan Stanley's Nigel Coe.

The bearish view holds that GE is heavily increasing exposure to a more commoditized area of the power generation spectrum (coal, hydro, transmission), the acquisition of a large European competitor carries significant “clash of culture” risks, and there's the potential for large project write-downs and restructuring programs.

On the other hand, coal generation is not going away any time soon with installed base growth comparable to gas over the next 20 years, and the service annuity on Alstom’s substantial installed base of coal and steam turbines accounts for the majority of the transaction value, Coe says.