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Alstom shares slip after GE deal

Article By: ,  Financial Analyst
June 24, 2014 11:15 AM

Shares in French industrial giant Alstom have slipped this morning (June 24th) as markets have responded to the huge deal to sell its energy assets to General Electric (GE).

After news of the £10 billion deal emerged, shares initially posted encouraging gains of around 2.4 per cent. However, at 09.29 BST this had been partially reversed, with stocks in the company down by 1.1 per cent on the Paris Stock Exchange.

The US company‘s bid was accepted over the weekend when Alstom’s board unanimously voted to accept the offer instead of a joint bid from Siemens and Mitsubishi Heavy Industries.

Both proposals were revised several times in the last few weeks as the companies entered a fierce bidding war.

Not only did they have to win over Alstom itself, but each of the bids also tried to win over the French government, which effectively gave itself a veto over the outcome of the negotiations.

GE’s deal was finally named as Paris’ preferred bid after significant concessions from the US firm, which will allow France to retain some control over what it sees as a strategically significant company.

Instead of simply taking over Alstom’s energy assets, GE will now run some key projects as joint ventures to ensure Alstom retains some level of control. It will also sell its railway ventures to the French firm, which will now become principally a train company.

Possibly more dramatic is the French government’s decision to give itself the option of purchasing a 20 per cent stake in Alstom from large shareholder Bouygues. It is hoped that move will give the government an additional level of control in the future of the company.

Siemens and Mitsubishi have already said that they are on standby to resume discussions with Alstom and the government if the talks to complete the deal fall through. However, it is expected that the sale will close early next year as long as it receives approval from regulators and shareholders and Alstom staff representatives.

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