GE Strategic Transformation Accelerating

EC and DoJ decisions pave the way to complete GE’s largest-ever industrial acquisition

BRUSSELS--()--GE [NYSE:GE] was informed today that the European Commission (EC) has approved the proposed Alstom power and grid deal and that the Department of Justice has also filed a proposed consent decree that would permit the acquisition to close. These clearances pave the way for GE to complete the transaction as early as possible in the fourth quarter.

"Today's decisions by the European Commission and Department of Justice are major milestones in completing this deal as early as possible in the fourth quarter,” said Jeff Immelt, GE Chairman and CEO. “We have addressed the EC’s and DOJ’s competition concerns while preserving the strategic and economic drivers of the deal. The complementary technology and geography of the Alstom assets will enable us to bring more value to customers and a strong return to GE shareholders.”

The EC’s approval is conditional on GE and Alstom fulfilling commitments given to the European Commission in connection with the clearance. Specifically, subject to regulatory approval, GE will divest to Ansaldo Energia, a supplier of power generation plants and components, a segment of Alstom’s heavy duty gas turbine business. This will include:

  • Alstom’s GT26 (an F-class gas turbine) product line for new unit sales
  • Alstom’s GT36 technology development program, which upon completion would result in an H-class gas turbine product.
  • Services contracts for 34 GT26 units. The remainder of Alstom’s gas turbine installed base (approximately 720 units) will remain with GE.
  • In addition, in order to address concerns raised by the DOJ and EC regarding competition for the service of GE gas turbines, GE will divest Alstom’s Power Systems Manufacturing (PSM) business, which provides after-market parts and services for other OEMs’ equipment. GE will receive a license to the PSM intellectual property used to offer after-market services for non-GE gas turbines.

GE is close to finalizing a deal to divest these assets to Ansaldo and that transaction would be expected to close after the closing of the GE/Alstom transaction, subject to required regulatory approvals.

GE reached an agreement with Alstom in April of 2014 to purchase Alstom’s power and grid businesses for €12.35 billion. Adjusting for the joint ventures announced in June 2014 (renewables, grid, and nuclear), changes in the deal structure, price adjustments for remedies, and net cash at close, the purchase price is expected to be approximately €8.5 billion (approximately $9.5 billion). The positive financial impact for GE remains unchanged. GE expects the deal to generate $0.05-0.08 of earnings per share in 2016 and $0.15-0.20 of earnings per share by 2018. GE is targeting $3.0 billion in cost synergies in year five and strong deal returns. Including the deal adjustments, the overall economics and strategic rationale remain the same as GE announced in April 2014.

Strategically, Alstom and GE’s power and grid technology and geography combined will enable many new opportunities to create value for customers, with:

  • Approximately 1,500 GW of installed base power generation, a 50% increase in GE’s current installed base.
  • One of the broadest and deepest renewables portfolio in the industry
  • Improved total thermal power plant design capability
  • Broader grid portfolio with the footprint and scale to compete globally
  • Stronger and expanded capabilities to provide project expertise and financing for power projects
  • Big data and analytics to improve performance of the installed base
  • New ability to compete for other-OEM services
  • Local resources and global reach to power customers in more than 150 countries
  • Shared expertise and technology of the GE Store to drive growth

The Alstom alliance is another important step in the transformation of GE. GE remains ahead of schedule in its disposition of GE Capital. The company anticipates that the Synchrony split will occur this year, as was previously stated. In a slow growth and volatile environment, the team is executing well. In its second-quarter earnings announcement, GE raised its full-year Industrial operating earnings per share guidance to $1.13-1.20 and is on track for that goal.

“The more we learned about Alstom’s technology and capabilities over the last 15 months, the more we liked the deal,” said Immelt. “It’s the right deal at the right time for GE.”

“Navigating the global regulatory environment is more challenging than ever, including in the U.S.,” Immelt continued. “Throughout the regulatory process, we have worked constructively with the European Commission, the Department of Justice and other regulators around the world. The cooperation among the various agencies has enabled a thorough review of the transaction and we are happy to now have these important clearances that we need to proceed towards closing.”

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS:

This document contains "forward-looking statements" – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," or "target." Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about our announced plan to reduce the size of our financial services businesses, including expected cash and non-cash charges associated with this plan; expected income; earnings per share; revenues; organic growth; margins; cost structure; restructuring charges; cash flows; return on capital; capital expenditures, capital allocation or capital structure; dividends; and the split between Industrial and GE Capital earnings. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: obtaining (or the timing of obtaining) any required regulatory reviews or approvals or any other consents or approvals associated with our announced plan to reduce the size of our financial services businesses; our ability to complete incremental asset sales as part of that plan in a timely manner (or at all) and at the prices we have assumed; changes in law, economic and financial conditions, including interest and exchange rate volatility, commodity and equity prices and the value of financial assets, including the impact of these conditions on our ability to sell or the value of incremental assets to be sold as part of our announced plan to reduce the size of our financial services businesses as well as other aspects of that plan; the impact of conditions in the financial and credit markets on the availability and cost of GECC's funding, and GECC's exposure to counterparties; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; pending and future mortgage loan repurchase claims and other litigation claims in connection with WMC, which may affect our estimates of liability, including possible loss estimates; our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so; the adequacy of our cash flows and earnings and other conditions which may affect our ability to pay our quarterly dividend at the planned level or to repurchase shares at planned levels; GECC's ability to pay dividends to GE at the planned level, which may be affected by GECC's cash flows and earnings, financial services regulation and oversight, and other factors; our ability to convert pre-order commitments/wins into orders; the price we realize on orders since commitments/wins are stated at list prices; customer actions or developments such as early aircraft retirements or reduced energy demand and other factors that may affect the level of demand and financial performance of the major industries and customers we serve; the effectiveness of our risk management framework; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of financial services regulation and litigation; adverse market conditions, timing of and ability to obtain required bank regulatory approvals, or other factors relating to us or Synchrony Financial that could prevent us from completing the Synchrony Financial split-off as planned; our capital allocation plans, as such plans may change including with respect to the timing and size of share repurchases, acquisitions, joint ventures, dispositions and other strategic actions; our success in completing, including obtaining regulatory approvals for, announced transactions, such as the proposed transactions and alliances with Alstom, Appliances and our announced plan to reduce the size of our financial services businesses, and our ability to realize anticipated earnings and savings; our success in integrating acquired businesses and operating joint ventures; the impact of potential information technology or data security breaches; and the other factors that are described in "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2014. These or other uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.

This document includes certain forward-looking projected financial information that is based on current estimates and forecasts. Actual results could differ materially.

Contacts

GE
Investor:
Matt Cribbins, +1-203-373-2424
matthewg.cribbins@ge.com
Media:
Jim Healy, +33-6-03-39-92-99
james.healy@ge.com
Seth Martin, +1-203-572-3567
seth.martin@ge.com

Contacts

GE
Investor:
Matt Cribbins, +1-203-373-2424
matthewg.cribbins@ge.com
Media:
Jim Healy, +33-6-03-39-92-99
james.healy@ge.com
Seth Martin, +1-203-572-3567
seth.martin@ge.com