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Health & Fitness

What is Alstom?

In the last several weeks that has been a multi-billion dollar deal involving three (3) multi-nationals that have operations around the world, revenues in the tens of billions (of dollars and/or euros), and several household names. In addition to the monetary implications of this deal, these negotiations have also sparked a debate on both sides of the deal with regards to what assets and businesses should be domestically owned versus available for sale to foreign powers.

Is any of this ringing any bells?

General Electric, the American conglomerate, has been courting the French energy firm Alstom for the last several weeks; the CEO of GE actually had a meeting with the French President Francois Hollande as well as several ministers to discuss the implications of this deal. After the initial offer was announced, and publicly denied by the management of Alstom, it became known that Siemens, the German conglomerate, had also put forth a competing bid Alstom.

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The proposed deal is meaningful for several reasons:

1) The size of the deal — GE’s offer of $13B is an example of how U.S. firms can deploy some of the overseas cash piles that have accumulated since the financial crisis.

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2) The tension involved — the proposal from GE to purchase the business outright has generated outcries in France, where the government bailed Alstom out in 2005 and the business currently relies on state owned enterprises (SOE’s) for a substantial chunk of business.

3) The competition between Siemens (an European firm) and GE (a U.S. firm), as well the continuing shift of G.E. to an industrial firm, with 75% of operating margins expected to come from industrial businesses by 2016.

A proposed deal, backed by Alstom’s management team was announced today, but it will be very interesting to see how this unfolds.

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