1. Eduard Biller Simon Foucher
GE / Alstom Merger
Eduard Biller
Simon Foucher

2. 1 2 3 4 Agenda Companies overview Strategy Merger Story & Roadblocks
Aftermath

3. General Electric
The acquirer

4. Company History
Founded by Thomas Edison as a combination of several electric businesses
Over time reinvented itself
Focus on industrial engineering now
Until the financial crisis the focus was on financial engineering
Divesting its financial assets now (spinoffs, sales, etc)
Is still divided into an industrial and financial section

5. Company Trivia
One of the largest and well-known companies worldwide
Revenue of over 148 bn $
Earnings of over 15 bn $
Almost 600 bn $ in assets
But almost 500 bn $ are accounted for GE Capital
When looking on the industrial arm only, it has almost no net debt

6. General Electric Revenue
2007: 170 bn $
2014: 148 bn $
GE Capital: % of revenue
% of revenue

7. General Electric Profit
2007: 22.2 bn (54%)
2009: 16.5 bn (8%)
2014: 15.2 bn (46%) 32bn dollars in assets will be sold to WF

8. Overall change in company portfolio Spinoff (Synchrony Financial)
Strengths:
Overall change in company portfolio
Spinoff (Synchrony Financial)
Sale of NBC
Leading position in several sectors
Low restructuring costs in the following years
Weaknesses:
Problem with € and Oil
Weak position in East Asia
1/3 of all orders are from regions who are dependent on commodity prices
Shareholders can exchange GE shares for Synchrony
Comcast buys NBC
Due to divesture not systemic relevant anymore
€: Others can undermine the deal + lower attribution from €
Oil: Few orders from Oil and Gas industry

9. Alstom
Target

11. Result of a Merger between Thomson-Houston Electric Company and
Société Alsacienne de Constructions Mécaniques in 1928
Operates in three segments
Grid Sector
Power sector
Transportation
Thermal power
Renewable power

12. Non-current assets: 13.2bn € Non-current assets: 3.4bn €
Balance Sheet
2014
2015
Non-current assets: 13.2bn €
Non-current assets: 3.4bn €
Current assets: 16.8 bn €
Current assets: 8.4 bn €
Non-current: Goodwill, Intangible assets and PPE: 9.8 bn
Working Capital assets by 7.7 bn
Change in right side: - working cap liabilities 8.9 bn € to liabilities related to assets held for sale 15.2 bn €
30 bn € in assets
33 bn € in assets
21 bn € in assets held-for-sale

13. Income from operations: 268 m € Income from operations : 318 m €
P&L
2014
2015
Income from operations: 268 m €
Income from operations : 318 m €
Net income: 556 m €
Net income: -719 m €
Bribery fine of 772 m $

14. Why does GE want to buy Alstom?
Thermal Energy
Compementary Steam/Gas
Windpower
Compementary Onshore/Offshore
Hydro Power
Alstom has a leading role
Services
Complementary position
Grid
Complementary position

15. Acquisition Timeline

16. Alstom stock never fully recovered from the recession

17. Start 2014: Pessimistic outlook
Alstom Cuts Margin and Cash Flow Outlook as Demand Falls
Plans to sell $2.7B billion in assets
Including minority stake in Rail

18. Apr 2014: Industrial sector showing strength
Alstom to Sell Steam Parts Unit for 1B$
S&P 500 Climbs to Record as Treasuries Fall, Oil Tumbles

19. April : Early rumors of GE bid
24th:Public news that GE and Alstom discussing potential deal
13B€ Transition; largest GE acquisition
Bouygues (29% shareholder of Alstom) on board

20. April: Followed by rumors of competitive bids
27th: News of alternative bid from Siemens
Exchange for part of its rail transport arm plus a cash offer as good as GE's
30th: GE confirms12.4B€ (17B$) bid for Alstom SA’s energy business

21. May: Government steps in
5th: French government states that it will not back GE’s bid
GE must improve bid and combine two companies’ rail businesses; lobbies Siemens to participate in auction
7th: Siemens CEO says he won't be forced into a white knight bid for Alstom

22. May: Government Insists
14th: France issues decree nicknamed "décret Alstom"
Power of the state to veto takeover of "strategic interests" (energy, water, transport, teleco, health)
22nd: GE extends bid to allow discussions with the government

23. June: Competition becomes official
16th: Siemens &Mitsubishi submit a competing proposal
Siemens acquire Alstom's gas turbine activities for 3.9B€
MHI to form JV with Alstom , acquiring stakes in power for 3.1B€

24. June: Bidding heats up
19th: GE revised its bid, same price, but with a lower cash transaction value.
Form a 50:50 JV combining in renewable and electric grid business and another JV in steam turbine and nuclear power.
GE to sell its rail signaling business to Alstom

25. June: Bidding heats up 20th: Siemens and MHI modified their offer
MHI increasing its stake to 3.9B€ (+800M€ from 3.1B€)
Siemens increases offer to 4.3B€ (+400M€ from 3.9B€)
Economy minister stated he would block both bids & French government was now backing the GE offer

26. June: GE Wins 21st: Alstom board met and backed GE's revised bid
22nd: French government agreed terms with Bouygues
Taking a 20% stake in Alstom from Bouygues shares at a 2–5% discount on a value of a minimum of ≈€35

27. Dec: Almost final approvals
19th: Shareholders approved the transaction by 99.2%
Bouygues under pressure to make a deal with government due to regulation issues in the teleco sector

28. EU Steps in
Early 2015 the EU Competition Commission began an examination process
Deal leaves only Siemens as GE’s main rival in Europe
Concerns of stifling innovation price rises

29. Sep 2015: Final regulatory approvals
8th European Union and US DOJ approved the deal
Subject to divestiture of Alstom's gas turbine manufacturing and parts
Closing targeted in Q4 2015

30. This Monday 2015: Deal closes
Completion of the transaction follows regulatory approval in over 20 countries
Changes in the deal structure (price adjustments for remedies, net cash at close & forex); the purchase price is €9.7B ($10.6B)
GE also announced completed sale of rail signaling business to Alsom for $800M 29

31. Aftermath

32. Future GE-Alstom

33. Current recommendation
HOLD
Two questions for the audience
Overall: $0.05 to $0.08 attribution in earning in 1. year
$0.15–$0.20 in 2018
Current earnings: $.26 estimate for this quarter; overall $1.30 per year
Government as a shareholder
Other use of the excess funds