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

  • 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.
Comments (46)
  • arthur_bishop1972
    , contributor
    Comments (2142) | Send Message
     
    No bueno

     

    : /
    21 Jun, 12:19 AM Reply Like
  • Ddd71
    , contributor
    Comments (26) | Send Message
     
    Anyone who is interested in an illustration of how the french government thinks and works should watch the comedy "Quai d'Orsay". Immelt needs to watch this movie before he writes the check. Maybe he will reconsider...
    21 Jun, 12:32 AM Reply Like
  • Nettligent
    , contributor
    Comments (1345) | Send Message
     
    I will watch Quai d'Orsay the French Minister tonight. Thank you for your nice recommendation.
    We sold half of our GE shares yesterday. French government digging its own graves and more problems ahead.
    21 Jun, 02:10 PM Reply Like
  • User 20118131
    , contributor
    Comments (23) | Send Message
     
    You have to wonder who the winner really is. Sure, Siemens now has GE in there backyard but goes it really make a difference in long run since Siemens has been able to effective compete against GE in the US and has a stronger relationship with China. GE will probably get a small boost in profit but now it has the French government breathing down its neck at every turn, making sure GE does not profit at the expense of French workers. If anything, Siemens was able to play a successful game of Chicken against GE by tying up a portion of its revenue and attention with its Alstom partnership. Hopefully, this "Golden" egg, Immelt fought for is not rotten
    21 Jun, 12:38 AM Reply Like
  • tangerinehouse
    , contributor
    Comments (21) | Send Message
     
    Bad move for GE Shareholders..ALL France State owned Companies are in very bad shape and hardly make profits.. That is on of the reasons why France is in an very bad Place to make business... Some day GE will happy to sell its Alstom Stake for an symbolic Euro... Wise Investors even not open an Lemonade Stand there.
    21 Jun, 12:48 AM Reply Like
  • DUP
    , contributor
    Comments (126) | Send Message
     
    Really all French companies are in bad shape, then how come Renault had to bail out Nissan, years ago. You know that well run Japanese entity, that can never do no wrong, the French dude saved them big time...wake up. And the French know how to not work after they are done working....the U.S. can learn a lot from older wiser countries....remember, we are only 238 years , France, Germany, England, Spain and many more have been around a heck of a lot longer, they might know a thing or 12. We are arrogant know it alls, not even knowing we don't know.
    21 Jun, 06:30 AM Reply Like
  • TAS
    , contributor
    Comments (1983) | Send Message
     
    The way things are going, France may be a better place to do business than the US at some point in the future.

     

    Our top employer appears to be the Disability Wing of the the fed government.
    21 Jun, 10:00 AM Reply Like
  • Gary Schuster
    , contributor
    Comments (144) | Send Message
     
    DUP, I think you make some good points, but I see things a little differently. It seems to me, as a country, we've been evolving to implement stupid policies--unfunded entitlements, tax policies that punish people that work hard and take risks, more restrictions on personal freedoms, etc. My thinking is that those European countries, that "have been around a heck of a lot longer", have used that additional time to evolve into even stupider policies!
    21 Jun, 10:54 AM Reply Like
  • AnonymousAlpha
    , contributor
    Comments (966) | Send Message
     
    I doubt people lose jobs by millions in France due to outsourcing and globalization. We got much bigger problems here then they do. White collar workers have no rights here, these corporations make you work day & night and during weekends as well, then they fire you.
    22 Jun, 08:17 AM Reply Like
  • Debutant
    , contributor
    Comments (1900) | Send Message
     
    Good luck to GE (or to any entrepreneur) in its partnership with constipated French socialists that are all talk and taxes.
    21 Jun, 12:56 AM Reply Like
  • 1951Mike
    , contributor
    Comments (11) | Send Message
     
    I have to wonder if Siemens was a shill bidder in this process.

     

    One the plus side, there is an estimated $2 Trillion in electrical generation and grid
    infastructure to be done in Europe over the next 20 years. This move will put GE more into the center of that.

     

    On the minus side, I cannot imagine having the French government as a business partner. The simple fact that the government itself wants partial ownership of the business is enough to know that their concept of "business" has far less to do with profit than anything else.

     

    I think GE walked into a trap. Once GE made the bid and Siemens was brought into the process they needed to go forward to keep Siemens from becoming an even stronger competitor than they already are.
    21 Jun, 01:02 AM Reply Like
  • DUP
    , contributor
    Comments (126) | Send Message
     
    Yeah with the U.S. gov't bailing out GM, and GM is still probably the worst run enterprise in the world. Horrible products, and inept management that remain clueless. This deal gets GE into the business more over there, smart move, they did it with lighting to compete with Philips and Osram, when GE bought Tungsram and Thorn, and GEC....if you ain't in it, you ain't competing.
    21 Jun, 06:33 AM Reply Like
  • User 20118131
    , contributor
    Comments (23) | Send Message
     
    If I remember correctly, we also bailout Chrysler with less hassle to the FIAT (Italian car maker) and no big brew haw front page news about the loss of an American "champion" to a foreign company (Chrysler is not). Also France is the 6th in the world for state ownership while the US is 24th according to the Wall Street Journal.

     

    Also as far as competing Alstom's energy is losing money and state intervention by France will make it harder to reorganize the company properly. Prime example is the Alcatel-Lucent. The French will most likely push for GE to conserve French jobs while cutting costs abroad even though the one of primary allures of Alstom is its assets in the developing world which will spend more money on its infrastructure than the flailing EU especially "the sick man of Europe" France. Also a weakened French government and the rising Euroskeptic party, National Front, could be a problem in the future for this alliance. Alstom, in the future, could be more of an anchor than an asset for future GE profit but I hope I am wrong.
    21 Jun, 10:29 AM Reply Like
  • bdarken
    , contributor
    Comments (416) | Send Message
     
    Wait till the Germans stop carrying the weight for Europe...Remember 2012 when the wheels were coming off and Greece went belly-up? It's been pretty quiet for a while, but wait till the chills of November and Mr. Putin shuts off the gas and tells Europe to turn up their wind and solar power. Add in the shifting political tides of Scandinavia, Spain and UK, and there's lots of very sketchy moving parts to this show---many of which are tied to the business of energy.
    22 Jun, 12:09 PM Reply Like
  • WPSPIKER
    , contributor
    Comments (1141) | Send Message
     
    At least it was not the 17 Billion they were talking about the last week or so, lots of grief about the deal at 17, the 13 is better for us GE shareholders.

     

    M
    21 Jun, 01:08 AM Reply Like
  • Mike Slattery
    , contributor
    Comments (95) | Send Message
     
    To WPSPIKER -

     

    The deal's value has not changed. It was always at $13.5 Billion for the Alstom assets being bought by GE and $3.5 Billion for the cash that is on Alstom's books for a total of $17.0 Billion. There is no "better" (or "worse") for GE shareholders.

     

    For full disclosure, I am long GE and will continue to be as the stock gets into the 30's and 40's in the years ahead.
    21 Jun, 12:09 PM Reply Like
  • 1RG
    , contributor
    Comments (4) | Send Message
     
    I'm with you Mike. GE is a microcosm of the U.S. if you aren't on board perhaps you should sell. Naysayers !
    22 Jun, 08:44 AM Reply Like
  • User 6830851
    , contributor
    Comments (109) | Send Message
     
    Muy bueno.
    21 Jun, 01:24 AM Reply Like
  • Patent News
    , contributor
    Comments (1312) | Send Message
     
    nice scam by the french
    21 Jun, 02:22 AM Reply Like
  • borkner
    , contributor
    Comments (78) | Send Message
     
    Can somebody of you can give me a short briefing please.

     

    If Alstom steps back from the offer of GE, they would have to pay a penalty of $230 Mill in favor of GE. Now I read, that as of Monday GE will have to declare if THEY will accept the offer France has made. If GE rejects this "offer", who is going to pay, GE or Alstom?

     

    I am afraid, this $20 Billion bid of the France Government was all set up not to pay the fine to GE.

     

    Am I right or am I wrong?
    21 Jun, 02:28 AM Reply Like
  • Mike Slattery
    , contributor
    Comments (95) | Send Message
     
    To borkner -

     

    Wherever you are reading that "as of Monday, GE will have to declare if THEY will accept the offer" is not a correct viewpoint.

     

    As noted in this article above, GE has already made a binding offer which expires on Monday (June 23rd), the French government has given its blessing, and the single remaining action is for Alstom's Board of Directors (BOD) to accept (which they are very likely to do) or reject (in which case GE gets paid the break-up fee of $230 Million).
    21 Jun, 12:18 PM Reply Like
  • Disenchanted
    , contributor
    Comments (166) | Send Message
     
    Is there any personal gains for Immelt from this deal? That kind of money can be better used to buy LA Clippers. He can bid with Ballmer for the team. Dumb and dumber! I'm a GE investor. For worse or better, we'll see later.
    21 Jun, 05:13 AM Reply Like
  • chuckleh
    , contributor
    Comments (151) | Send Message
     
    LOL

     

    Very long GE here.
    22 Jun, 09:53 AM Reply Like
  • dealraker
    , contributor
    Comments (392) | Send Message
     
    Here comes another 25 SA articles such as "GE will top $45 in 3 years and 2 months based on fabulous relations with the French government!"
    21 Jun, 06:02 AM Reply Like
  • TAS
    , contributor
    Comments (1983) | Send Message
     
    If this moves the TESLA and Kinder Morgan articles off the page, I think this is a good thing
    21 Jun, 10:01 AM Reply Like
  • Marcelobozo
    , contributor
    Comments (17) | Send Message
     
    In previous comments I stated that Siemens was brought in to this party to spruce up GE's offer, and that's what happened; Siemens really did not have the financial capability to offer a value bid. The french government participation as 20% owner needs to be clarified; as in any deal the devil is in the details.
    21 Jun, 06:52 AM Reply Like
  • gcmagone
    , contributor
    Comments (881) | Send Message
     
    A pact with France is asking for trouble. I commented about this a week or so ago and my comment was deleted by SA. Apparently, I insulted the French. I stand by my comment.
    21 Jun, 07:23 AM Reply Like
  • elkarlo
    , contributor
    Comments (184) | Send Message
     
    Giving up the RR signaling unit seems dumb, really dumb to me. That makes me as mad as closing the cash part of the deal
    21 Jun, 07:26 AM Reply Like
  • Charles A. Smith
    , contributor
    Comments (1079) | Send Message
     
    "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."

     

    Immelt needs to be quiet about any positives for the deal for GE, even after it closes. If he touts any aspect of the transaction which benefits GE, then the French government is liable to change it by decree! Furthermore the government will have de facto veto power over any and all future operations. As we've seen over the past month, the French government will do whatever it wants, whenever it wants, depending on the political winds. A contract is meaningless. Good luck with this one Jeffrey.
    21 Jun, 07:36 AM Reply Like
  • Jcflash
    , contributor
    Comments (22) | Send Message
     
    Immelt set out to buy Alstom instead he got a joint venture and he's still paying through the nose, no wonder the stock price is still mired in the 20s with this genius at the helm. He was going to spend billions in France even if he had to give the money away, and it looks like he did give it away.
    21 Jun, 07:51 AM Reply Like
  • PACKER man
    , contributor
    Comments (96) | Send Message
     
    Please, someone, correct me if I am wrong but I thought that GE used its cash trapped overseas to pay for this deal?
    That is $$ on which US taxes would be due should GE bring it back home to the US; so, why is buying Alstom not a good way to use that money for something that may be productive over time versus letting it stay unproductive overseas???
    21 Jun, 07:52 AM Reply Like
  • tomlos
    , contributor
    Comments (1097) | Send Message
     
    I have a small position in GE, but wondering why the heck I am holding onto it at this point...
    21 Jun, 08:29 AM Reply Like
  • elkarlo
    , contributor
    Comments (184) | Send Message
     
    Wonder if the French will get seats on the board, and if so how many?
    21 Jun, 08:31 AM Reply Like
  • jstratt
    , contributor
    Comments (2195) | Send Message
     
    Is GE buying or selling?

     

    I think the truth is Siemens/Mitsubishi was a straw bidder. The French government got GE to bid against itself and sell assets to the French government in the process.
    21 Jun, 09:32 AM Reply Like
  • dawndale
    , contributor
    Comments (24) | Send Message
     
    There is always more happening behind the scene than the ordinary investor knows, and that is necessary! Corporations need confidentiality just as individuals do. Just how much damage would be done if every discussion and plan was laid out for all to see? Again, pay attention to the history. Prior actions can provide guidance as to what and when to do act.
    21 Jun, 09:55 AM Reply Like
  • redpepper530
    , contributor
    Comments (5) | Send Message
     
    The best deal for all is when one party feels they may have paid to much, and the other not enough.
    In the long run it will be a good deal for both,I will buy more GE. As I believe it is a good deal overall for pre tax money that was not put to any good use, I am a long on G.E. And believe it will prosper with this deal. Good for you mr Imelt
    21 Jun, 10:00 AM Reply Like
  • Bentodd2000
    , contributor
    Comments (22) | Send Message
     
    Glad to see this deal go through, Many people keep going on and on trashing GE about this deal. Management made it happen and it will benefit shareholders. If people are upset about the deal and sell off I will add on the dip.

     

    Long GE and happy for this deal.
    21 Jun, 10:41 AM Reply Like
  • 1RG
    , contributor
    Comments (4) | Send Message
     
    Amen!! all the naysayers have the option of selling....
    21 Jun, 04:15 PM Reply Like
  • Bentodd2000
    , contributor
    Comments (22) | Send Message
     
    I was actually agreeing with naysayers for a while. But I do trust GE to make the right decision in the end. I have to give credit for getting the deal done now we can move on and enjoy the increased profits and hopefully get a dip next week at add more shares.
    21 Jun, 06:49 PM Reply Like
  • rgperrin
    , contributor
    Comments (610) | Send Message
     
    At the rate France is declining, Mr. Immelt might be able to buy and "restructure" it in another ten or so years.

     

    Long on GE and hopeful. . . .
    21 Jun, 10:52 AM Reply Like
  • fredak
    , contributor
    Comments (22) | Send Message
     
    I wonder what the savings are to GE by investing in France with their funds not repatriated to U.S. and the related taxes. The heat from the U.S. Gov't on overseas profits is getting intense.??
    21 Jun, 10:55 AM Reply Like
  • Harry Polizzi
    , contributor
    Comments (318) | Send Message
     
    I think SA got the 1st bullet point backwards. Instead of, "GE is the apparent winner in the contest for Alstom (OTCPK:ALSMY), shutting out Siemens (OTCPK:SIEGY) and Mitsubishi (OTCPK: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." it SHOULD read (emphasis added), "GE is the apparent LOSER in the contest for Alstom (OTCPK:ALSMY), BEING SADDLED WITH the french government instead of Siemens (OTCPK:SIEGY) and Mitsubishi (OTCPK:MHVYF), as the French government has given its blessing to GE’s offer while RIPPING OFF a 20% stake for itself - which means GE is now effectively going into business with the French state."

     

    Ayuh
    21 Jun, 11:26 AM Reply Like
  • Deja Vu
    , contributor
    Comments (1148) | Send Message
     
    At this point GE needs to be broken up. The head has stopped communicating with the limbs already. Why GE wants to grow even more bigger is a mystery to me. Reminds me of compulsive empire building - empires that usually bloated and rotted from within...best way to unlock value is to split GE into GE capital (almost done), GE Aviation, GE Infrastructure, GE Heavy Electrical, etc etc
    21 Jun, 12:17 PM Reply Like
  • Rock Island Express
    , contributor
    Comments (13) | Send Message
     
    Oh Mon Dieu, what a horrible deal! Negotiated like complete amateurs. Minor league M&A....
    21 Jun, 02:27 PM Reply Like
  • Brlanger
    , contributor
    Comments (14) | Send Message
     
    Time to move on. There are better run companies out there that return some of the profits to its shareholders. This is not a good deal in todays competitive marketplace.
    21 Jun, 04:49 PM Reply Like
  • JackLupei
    , contributor
    Comments (27) | Send Message
     
    CFM International is the wildly successful 50/50 joint venture company of GE Aviation and Snecma (Safran) of France which design and manufacture turbofan jet engines used by Boeing(U.S.), Airbus(Europe) and Comac(China) aircraft companies. CFM's new Leap turbofan engine has attracted more than 5000 orders and GE plans to produce 1700 engines by 2018.

     

    CFM International is the "model" of a highly successful venture managed jointly by GE and Snecma, and being subject to French Government scrutiny. Aviation is important in France. They believe aviation is a French invention.

     

    Therefore, the 50/50 joint ventures required by the French Government for GE/Alstom should be successful as they follow a model that has been proven as a successful melding of GE and French resources.

     

    Those of you that doubt this new GE/Alstom relationship should research the Franco/GE bond formed by CFM International.
    21 Jun, 11:58 PM Reply Like
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