GE in talks to buy Alstom power turbine division

April 26, 2014 - 12:00:00 am

PARIS: US industrial products giant General Electric is in talks to buy the global power turbines division of struggling French engineering group Alstom, according to two sources familiar with the discussions.

Earlier yesterday, Alstom Chief Executive Patrick Kron confirmed to union representatives that there were talks about an “industrial deal,” but did not name GE. 

The sources said a deal could be announced in the coming days after a board meeting yesterday afternoon. Both sources said it was Alstom, which makes power turbines and railway equipment, which had made the initial approach, and that Alstom’s main shareholder, French conglomerate Bouygues  with 29 percent, was backing the deal.

Alstom, Bouygues and General Electric declined to comment.

French Economy Minister Arnaud Montebourg promised in an interview with Le Monde newspaper to protect the national interest and to study “other solutions and scenarios” for Alstom, one of the country’s top private-sector employers.

He said he planned a meeting with GE management and had already met Kron on Thursday.

Alstom employs 18,000 people in France, about 20 percent of its global workforce.

Trading in Alstom shares was suspended pending a statement from the company. The shares closed up 10.9 percent on Thursday after Bloomberg reported that GE was in talks about a $13bn full takeover bid for Alstom.         

GE, with a market capitalisation of $265bn, is about 23 times bigger than Alstom, valued at around $11.5bn. 

A deal to sell a power division beset by weak demand, low margins and industry oversupply to GE calls into question Alstom’s existing plans to sell non-core assets and a stake in its transport arm to fill a hole in its balance sheet.

Kron told union representatives on Friday that there was no guarantee a deal would go through but he hoped to have answers for them “in the coming days”, union sources said.

The head of Alstom’s transport arm told Reuters in February the group was looking to list the unit separately as early as June if a trade buyer couldn’t be found any sooner. De facto, if a deal with GE left Alstom with just its transport arm, a listing would no longer be needed. “We will see what tomorrow brings,” Kron reportedly told unionists. “I have to ensure a future for each of the group’s units.”

Alstom was bailed out by the French state in 2004 and relies heavily on orders from national rail operator SNCF and utility EDF.

The group announced 1,300 job cuts last year and put assets up for sale to raise cash, including a stake in its transport business, which makes France’s prized high-speed TGV trains. It also floated the possibility of an IPO of the business.