GE set to prevail in its bid for Alstom, but some see a Pyrrhic victory

|By:, SA News Editor

GE is the apparent winner in the contest for Alstom (ALSMY), shutting out Siemens (SIEGY) and Mitsubishi (MHVYF), as the French government has given its blessing to GE’s offer while buying a 20% stake for itself - which means GE is now effectively going into business with the French state.

In the ~$13.5B deal, GE would acquire Alstom’s natural gas turbine operations along with its valuable customer base while selling to Alstom its railroad signaling business, and 50-50 joint ventures would be created for steam turbines, renewable energy and electrical grid systems.

The concessions will mean a smaller boost to GE's profit and fewer cost savings from the deal, and could complicate decision making in situations where the French government feels it has an interest, a William Blair analyst says.

GE's Jeffrey Immelt says it's not the straight takeover of the energy business he had envisioned, but that 86% of the deal's synergies - essentially the value of the energy business - were outside of the joint ventures.

Alstom's board is due to decide on the deal by Monday, when GE's binding offer expires.