US-based General Electric has secured approval from the European Commission (EC) and US Department of Justice (DOJ) for the €12.5bn ($13.9bn) acquisition of French Alstom’s power and grid business.
These approvals bring the total number of authorisations for the deal to up to 20, which clears the way for GE to complete the transaction by the end of the year.
The deal was under close scrutiny as Europe’s highest anti-trust authority was concerned that it could decrease competition in the heavy-duty gas turbines segment across the European market, leading to less innovation and increased equipment and power prices.
The EC was apprehensive, thinking the deal would leave only two major players in the heavy-duty market, one being the merged GE-Alstom entity and the other Germany-based Siemens.
In order to address these concerns, GE had agreed to divest ‘central parts of Alstom’s heavy-duty gas turbines business’ to Italian rival Ansaldo Energia.
Alstom chairman and CEO Patrick Kron said: "In addition to fulfilling the authorities’ wish to maintain the level of competition in the market, General Electric’s commitments protect the interests of Alstom employees, shareholders and customers."
GE chairman and CEO Jeff Immelt said: "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."
EC commissioner in charge of competition policy Margrethe Vestager said: "Divestment of Alstom’s key technology to produce heavy-duty gas turbines to Ansaldo will ensure that European business and consumers continue to benefit from this innovation and know-how."
In addition to the heavy-duty gas turbines business, the EC found other organisations that are parts of the transaction, including the thermal power generation businesses (other than gas), grid and renewable to be complementary and thus, unlikely to cause competition issues.
Alstom intends to focus on its transport business following this divestment of its power assets.
Conversely, GE expects cost synergies of $3bn from the deal over the next five years.
Image: A General Electric electricity pylon. Photo: courtesy of duron123 / FreeDigitalPhotos.net.