EU approves GE's acquisition of Alstom's power business
09 September 2015
General Electric has won EU approval for its €12.4-billion acquisition of Alstom's power business after it agreed to sell some of the French company's turbine assets to Italian rival Ansaldo Energia.
In November, the French government accorded its approval to the deal, after having declared in May, when GE tabled the bid for Alstom, that it would oppose the acquisition as the french company was one of the country's largest industrial conglomerates.
Earlier in 2010, it turned down GE's proposal to buy French nuclear giant Areva's power grid equipment unit in favor of its European rival Schneider Electric.
According to EU officials, GE's concessions addressed concerns over reduction of competition in the Europe for heavy duty gas turbines to two major players GE and Germany's Siemens which could end up increasing prices and the cost of electricity.
The deal for Alstom's energy business - its largest deal ever, would see two of the world's biggest manufacturers of power plant hardware join hands and enable GE to increase its focus on industrial operations and shift away from finance.
The EU decision would not only create a major new player in Ansaldo, it would also allow GE to press ahead with a cost-cutting programme. GE told investors in May it expected $3 billion in cost reductions over the next five years as it combined operations with those of Alstom.
The deal had been approved by regulators elsewhere, including in the US yesterday. However, according to commentators, overcoming the European hurdle would come as a relief to GE, as EU officials had blocked its $42-billion offer for Honeywell International 14 years ago, despite clearance from US regulators.
The GE - Alstom deal has also been approved by US regulators, with the Department of Justice last morning filing a proposed ruling that would allow it to proceed.
The nod from EU competition officials yesterday brings to an end, difficult negotiations that stretched over months. At times, it looked like the EU would block the merger over fears of GE gaining dominance in the market with the deal.
At the time the EU investigations were launched in February, the US company had initially dismissed concerns over market dominance. The EC however, held the view that any distortion of competition in the lucrative turbine business could have a harmful impact on European energy consumers.
According to Margrethe Vestager, the EU's competition commissioner, the final approval showed that Europe was ''open for business and that Europe-based technology could thrive and attract foreign investment'', rebutting US accusations that Europe's competition enforcers were becoming increasingly protectionist.
''What we want, of course, is effective competition in a market that has a direct impact on the prices of electricity,'' Ms Vestager said.
''With this divestiture, it is possible to ensure that European know-how and innovation is preserved but also that there is room for future high-tech innovation in this area because Alstom's previous work can continue in Ansaldo.''