|General Electric outbids Siemens to buy Alstom
General Electric scored large in its win over Siemens to buy the energy arm of French industrial giant Alstom.
But being forced to accept the involvement of the interventionist French government in its largest-ever acquisition could render the deal less sweet than GE hoped.
On Saturday, the American company finalized a 12.34 billion euro agreement to take over Alstom's energy businesses.
The prize is Alstom's gas turbine business, which GE will take over completely. It is a large, lucrative business with long-term contracts and income streams, and GE is already the world leader in the sector.
But GE will also take on Alstom's nuclear, steam turbine, offshore wind and hydro power businesses, which it will run as 50-50 joint ventures with French shareholders including, most importantly, the government.
And it will fold its electricity grid business into Alstom's, also to be run as a 50-50 joint venture.
Meanwhile it will hand its own train signalling business to the firm's high-speed rail operation -- which makes France's famed TGV trains -- and which will then be the core business of Alstom.
None of that was part of the US titan's original proposal, but it faced a French government challenged by recession and soaring unemployment and determined to protect the jewels of French industry.
To seal the deal, GE had to pledge to create jobs in France when it might have originally thought to make gains through consolidation. It agreed to the government holding key blocks of shares in the joint ventures, and granted the government a veto over key decisions.
Among concessions it had to make: a pledge to pay penalties of 50,000 euros for every job out of the 1,000 promised that it fails to create in France. --AFP