ALO Alstom

By Tom Fairless 

BRUSSELS-- General Electric Co. secured approval from Europe's top antitrust authority for its acquisition of Alstom's power business on Tuesday after agreeing to sell assets to an Italian rival that regulators hope will become a strong new competitor in Europe.

The European Union's approval, which follows eight months of tough negotiations, puts GE on the brink of closing its biggest ever deal. U.S. authorities also signaled their approval on Tuesday, joining around 20 other global regulators that have already given the green light.

In Brussels, regulators had pored over the deal for months amid concerns that it would lead to higher prices in Europe for large gas turbines. "There was a great risk of choice going down and prices going up," Margrethe Vestager, the EU's antitrust chief, said at a news conference.

To assuage those concerns, GE agreed to sell "central parts" of Alstom's large gas turbines business to Ansaldo Energia of Italy, the EU said. Those divestments, the regulator said, will allow Ansaldo "to replicate Alstom's previous role in the market, thereby maintaining effective competition."

Despite the asset sales, Jeff Immelt, GE's Chief Executive Officer, said the "strategic and economic drivers of the deal" had been preserved. He said the deal would close "as early as possible in the fourth quarter."

When it was announced more than a year ago, GE valued the deal at EUR12.35 billion ($13.7 billion). However, that has fallen to around EUR8.5 billion, reflecting the impact of joint energy ventures announced last year, changes in the deal structure, price adjustments for the remedies and net cash at close, GE said.

Under the agreement with Brussels, GE agreed to divest Alstom's technology for two models of large gas turbines, as well as "a large number" of Alstom's turbine-research engineers, two test facilities in Switzerland, and Alstom's Florida-based servicing business.

GE already manufactures gas turbines of corresponding size to the two Alstom models, and the company says it will retain licenses that will enable it to compete for business servicing turbines made by other manufacturers -- an opportunity for future earnings growth.

The U.S. company will also divest the long-term servicing contracts for 34 turbines that have already been installed by Alstom. GE has said that Alstom's servicing contracts were a key attraction of the deal, but a person close to the deal said the divested contracts amounted to only 4% of Alstom's total installed base.

"I am glad that we can approve this transaction, which shows that Europe is open for business and that Europe-based technology can thrive and attract foreign investment," Ms. Vestager said.

U.S. antitrust authorities, working in concert with Brussels, said they would require GE to divest the Florida-based servicing business.

The EU must sign off on the asset transfers before the deal can go ahead, Ms. Vestager said. GE has secured a EUR300 million rebate from Alstom for the remedies.

Steve Bolze, chief executive of GE's power business, said the deal would be "transformative" for the company's power business, expanding the number of installed turbines it services by 50% in a single shot. GE will aim to achieve $3 billion of annual cost synergies at the combined business after five years, he said.

Ted Mann contributed to this article.

Write to Tom Fairless at tom.fairless@wsj.com

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(END) Dow Jones Newswires

September 08, 2015 12:43 ET (16:43 GMT)

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