NEW YORK — The European Union will announce it has approved a deal under which General Electric will acquire the energy business of French company Alstom for $12 billion, a source close to the transaction said Monday.
In order to win the green light from the European Commission, GE has had to make concessions, the source said. EU anti-trust regulators had expressed concern the deal could lead to too much concentration in the gas-turbine sector.
A formal announcement is expected Tuesday, the source said.
Approval would end months of uncertainty and tension over the proposed deal, part of a drive by the American conglomerate to stake more of its future on industrial operations. The deal was first proposed a year ago, but in a sign of the jitters it triggered in Brussels, the Commission twice delayed making a decision on whether to OK it.
The EU concerns centered mainly on possible distortions in the market for maintaining high-power gas turbines, used mainly in electricity generating plants. This lucrative market is dominated by GE with a 50% stake, followed by Siemens of Germany, Mitsubishi Hitachi Power Systems, Alstom and Ansaldo Energia of Italy.
After initially putting up resistance, GE ultimately agreed to shed some maintenance service assets and patents to Ansaldo Energia, sources told AFP, confirming news reports.
Turbine maintenance is a money maker for GE and at the heart of the potential $3 billion in synergies it hopes to make in the deal with Alstom. It has forecast that after the deal, its profits will double from 2016 to 2018.
GE has promised the French government that it will create 1,000 jobs, among other commitments. GE had insisted it would not make concessions that would render the deal less attractive. But in the end, it has seemingly given in, although not without seeking something from Alstom. In late July, the French firm slightly lowered the selling price.
Further Approval Still Needed
Even after getting EU approval, GE needs the green light from regulators in other countries, including the United States.
Winning EU approval is a personal victory for GE CEO Jeffrey Immelt, who had made acquisition of the Alstom energy business a cornerstone of the new GE.
Immelt took over from Jack Welch in 2001 and moved to shift GE back to its industrial and manufacturing roots, with more focus on making equipment for aeronautics, electricity generation and equipment for construction, transportation and health care.
With the same goal of focusing on industrial operations, GE is trying to sell its appliances business to Sweden’s Electrolux for $3.3 billion.
But the U.S. Department of Justice filed a lawsuit in July to block the Electrolux deal on grounds it would lead to higher prices of key cooking appliances for American consumers.
The GE-Alstom deal had already been approved by the boards of both companies and by the French government. The announcement Tuesday will also involve a news conference by EU Competition Commissioner Margrethe Vestager, the first source said.
Officials at the Commission and at General Electric declined to an AFP request for comment.
By Luc Olinga
Copyright Agence France-Presse, 2015
