General Electric
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 of
France, after European officials agreed that G.E. 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 R. Immelt,
G.E.’s chairman and chief executive. He devoted more than a year to
careful 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 General Electric, the deal is an important step in the
company’s planned return to its industrial focus after a risky
diversification into finance by Mr. Immelt’s predecessor, John F. Welch
Jr.
Mr.
Immelt also succeeded in Brussels where Mr. Welch had failed in
spectacular fashion 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 American deal to be
halted by regulators there.
The
deal is meant to help G.E. extend its leading role in the business of
providing electrical utilities with generating equipment and power-grid
infrastructure at a time the world is increasingly moving away from
dirty coal and toward cleaner natural gas, solar and wind energy.
The
Alstom assets, in particular the gas and steam turbine businesses,
would strengthen the American company’s footing in emerging markets like
China and India, where air pollution from coal power is a menace to
public health. G.E. 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 G.E. is Alstom’s
heavy-duty gas turbines business, which holds lucrative contracts
worldwide for servicing installed power plants. Because G.E. 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 American company.
Ms. 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, General Electric 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.
Ms.
Vestager, referring to the size of the overall transaction, said at a
news conference in Strasbourg that, “In my book, this is a big deal.”
The divestitures would avoid “a great risk of choice going down and
prices going up,” she said.
The
conditions required for the approval by the European authorities showed
that “Europe is open for business,” but also that “you cannot buy
yourself into a monopoly,” she said.
Ms.
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 G.E. The two companies
agreed that Alstom’s transport business, which makes high-speed trains
like the T.G.V. 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 François Hollande, challenged the initial proposal, Mr. Immelt worked with officials in Paris
to modify it to their liking, agreeing to form several joint ventures
with the French state. Throughout, Mr. Immelt worked to ensure that G.E.
would walk away with the gas-turbine business, saying that he was open
to discussing anything as long as the deal continued to make economic
sense.
(NY Times)