Alstom Drops Price by $329 Million to Secure GE Takeover

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--French engineering firm Alstom S.A. (Levallois-Perret, France) has agreed to accept 300 million euros ($329 million) less than originally agreed for its power turbines unit from General Electric Company (NYSE:GE) (Fairfield, Connecticut), in an effort to get the deal past the European Union (EU).

"The European Commission has been looking at the impact of the deal on competition and has raised a concern about the possible decrease in gas turbine competition that may result from the deal," the company said in a statement. "Both General Electric and Alstom believe the deal is pro-competitive, but have agreed to explore remedies to secure clearance. In order to support General Electric in its offering of a comprehensive set of remedies addressing the concern of the Commission, Alstom's Board of Directors has unanimously accepted that the Group would contribute financially to such remedy package through a reduction of 300 million euros ($329 million) from the original 12.35 billion-euro ($13.55 billion) purchase price. The parties continue to have constructive discussions with the Commission regarding the transaction."

Last July, Industrial Info reported on the proposed deal overcoming a key obstacle with the French government. For additional information, see June 24, 2014, article - GE Nears $17 Billion Deal to Buy Alstom's Energy Assets after France Wins Buying Option.

Earlier this month, GE announced that it was willing to make unspecified concessions to the European Commission to smooth the path of the deal. The Commission launched an anti-trust investigation into the deal in February.

Commissioner Margrethe Vestager, in charge of competition policy, said: "We are concerned that the proposed acquisition might not only lead to higher prices, but also result in less choice for customers and less innovation in the sector. Technology is and will continue to be crucial to help Europe meet its environmental commitments. Therefore, it is essential to maintain competition in the heavy-duty gas turbines (HDGT) market."

There are only four global players in the HDGT sector: GE, Alstom, Siemens AG (NYSE:SI) (Munich, Germany) and Mitsubishi Hitachi Power Systems (MHPS) (Tokyo, Japan). The Commission classes turbine maker Ansaldo Energia (Genoa, Italy), as "a niche player with a more limited geographic reach."

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