PARIS -- General Electric Co. on Tuesday overcame the last big hurdle to the largest acquisition in its history, a $13.5 billion deal for the power business of Alstom SA, after European officials agreed that GE had adequately addressed their antitrust concerns.
The approval, announced in Strasbourg, France, by Margrethe Vestager, the European Union competition commissioner, is a triumph for Jeffrey Immelt, GE's chairman and chief executive. He devoted more than a year to corporate diplomacy in pursuing his goal -- first in winning the French government's endorsement, and then, in a more protracted process, gaining approval from antitrust regulators in Brussels.
More significant for GE, the deal is an important step in the company's planned return to its industrial focus after a risky diversification into finance by Immelt's predecessor, John F. Welch Jr.
Immelt also succeeded in Brussels where Welch had failed more than a decade ago. In July 2001, European officials blocked General Electric's planned $42 billion acquisition of Honeywell International on antitrust grounds, the first big U.S. deal to be halted by regulators there.
The deal is meant to help GE extend its leading role in the business of providing electrical utilities with generating equipment and power-grid infrastructure at a time when some nations are moving away from coal and toward natural gas, solar and wind energy.
The Alstom assets, in particular the gas and steam turbine businesses, would strengthen the U.S. company's footing in emerging markets such as China and India, where air pollution from coal power is a public health issue. GE is also obtaining sophisticated technology in renewable energies and grid infrastructure, as well as the French company's expertise in power-plant design.
Alstom's power unit makes equipment for generating and distributing electricity for utilities across the globe. The main prize for GE is Alstom's heavy-duty gas-turbine business, which holds lucrative contracts worldwide for servicing installed power plants. Because GE is already the world leader in that field, its main rival in Europe, Siemens, had argued to antitrust officials that the deal would leave too much of that market in the hands of the U.S. company.
Vestager had signaled in February that asset sales would be required to gain her office's approval, warning that the deal as then structured might lead to higher prices and fewer options for customers.
To win the commission's approval, GE agreed to sell a number of assets to Ansaldo Energia, an Italian engineering company that builds and services power plants. The assets to be divested include two models of gas turbines and various service contracts in Europe. Ansaldo will also buy Alstom's Power Systems Manufacturing unit, which makes parts for servicing gas turbines.
"In my book, this is a big deal," Vestager, referring to the size of the overall transaction, said at a news conference in Strasbourg. The divestitures would avoid "a great risk of choice going down and prices going up," she said.
The conditions required for the approval by European authorities showed that "Europe is open for business," but also that "you cannot buy yourself into a monopoly," she said.
Vestager also emphasized how important it was to have effective competition in a market with a direct impact on electricity prices, saying that the divestitures ensured European innovation would "live on."
Alstom, worried that it did not have the scale to continue competing independently in the face of a weak European market and a rising threat from Asia, agreed in April 2014 to work toward a sale of its power assets to GE. The two companies agreed that Alstom's transport business, which makes high-speed trains like the TGV in France, and other rolling stock and rail infrastructure, would not be part of the agreement and would continue to stand alone.
When the French government, led by President Francois Hollande, challenged the initial proposal, Immelt worked with officials in Paris to modify it to their liking, agreeing to form several joint ventures with the French state. Throughout, Immelt worked to ensure that GE would walk away with the gas-turbine business, saying he was open to discussing anything as long as the deal continued to make economic sense.
Business on 09/09/2015