ALSTOM: The board of Alstom has unanimously recommended that shareholders accept a deal with GE which would see the French company sell its energy activities and focus on transport, with the acquisition of GE’s signalling business and international collaboration with GE in the rail sector.

The deal is subject to regulatory and shareholder approval. Alstom Chairman & CEO Patrick Kron expects this to be received later this year, but warned that it would be a complex and time-consuming process.

Closure is expected in the first half of 2015, with GE acquiring Alstom’s Thermal Power, Renewable Power and Grid sectors for a fixed price of €12·35bn. Alstom would use the proceeds to invest in its Transport business, pay down debt, return cash to shareholders and invest €2·6bn in three 50:50 joint ventures with GE in the energy sector.

To strengthen its wholly-owned Transport business, Alstom would pay around €600m to acquire 100% of GE’s signalling business which has 1 200 employees and sales of €400m in 2013, 60% in North America. Kron said there is a ‘strong appetite’ at Alstom for signalling consolidation which would give the business a larger scale, improved geographic diversification and a major presence in the North American Positive Train Control and freight railway signalling markets.

Alstom and GE would also sign multiple ‘very promising’ collaboration agreements, which could see Alstom service and possibly assemble GE locomotives outside the USA, and would cover R&D, sourcing, manufacturing and commercial support activities in the USA. GE Capital would support financing. Kron said Alstom has ambitions in the US urban and high speed rail sectors, where GE could support the company ‘on a case-by-case basis’. The Transport business would have sales of around €6·2bn, and 28 200 employees.

As part of its approval for the transaction, the French government has reached an agreement for major shareholder Bouygues to lend the state 20% of its shares in Alstom on the closure of the deal. The state would then be able to appoint two members of the Alstom board. The agreement allows the state to buy up to 20% of Alstom’s shares from Bouygues within 20 months of the completion of the deal with GE. Kron stressed that Alstom was not part of these investment discussions.

In recommending acceptance of the GE offer, Alstom rejected a rival proposal from Siemens and Mitsubishi Heavy Industries. In the rail sector, this would have seen Siemens and Alstom form a 50:50 Signalling & Mobility Infrastructure joint venture. Kron said there would have been substantial difficulties in merging the two companies’ rolling stock businesses.

  • Alstom Transport and Russian Railways have signed a memorandum of understanding to co-operate in the provision of consultancy services, infrastructure design and project management. ‘The unique expertise of RZD International in the construction and service of railway infrastructure in different geological and climatic conditions, coupled with Alstom’s cutting-edge infrastructure design and technologies, will allow us to bring the best of global practices to our customers worldwide,’ said Alstom Transport President Henri Poupart-Lafarge.