Diversified conglomerate General Electric Co. (GE) is in talks to buy French industrial company Alstom SA (ALSMY, AOMFF,ALS.L) for more than $13 billion, Bloomberg reported Wednesday, citing people with knowledge of the matter. A deal may reportedly be announced as early as next week.
Alstom is a manufacturer of high-speed trains and power plant equipment. An acquisition of Alstom would give GE control of the French company's high-speed TGV trains and rail-signal technology.
Under CEO Jeffrey Immelt, GE is seeking to reduce its lending unit and boost earnings from its industrial businesses. In December 2013, GE said it plans to cut costs in order to boost margins and also increase sales at its industrial businesses even as it shrinks its lending business.
An acquisition of Alstom for more than $13 billion would be about 25 percent higher than Alstom's current market value of over $10 billion. A 20 percent decline in Alston's share price last year has made the company a cheaper acquisition target.
According to the Bloomberg report, GE has the support of French conglomerate and Alstom shareholder Bouygues SA (BOUYY.PK) for the acquisition of Alstom. In late February, Bouygues reported a loss for the fourth quarter, hurt by a hefty write-down on its investment in Alstom.
Alstom has been focusing on selling non-core assets in order to cut down on costs and reduce debt. In early April, Alstom said it agreed to sell its auxiliary components business to European investment firm Triton for an enterprise value of about 730 million euros. The business is part of the steam segment within the company's thermal power business.
In mid-January, Alstom reported a decline in third-quarter sales, mainly reflecting negative currency impacts. Looking ahead, the company, while backing its fiscal 2014 forecast for low-single digit organic sales growth, warned that it is affected by continuing low orders for new thermal power plants.
Alstom noted that demand in a number of markets was weak and would continue to remain so in the short term. The company added that level of turnkey and equipment contracts booked was substantially lower than expected in Thermal Power, which would have an impact on some of its key performance indicators.
GE closed Wednesday's trading at $26.42, down $0.16 or 0.60 percent on a volume of 29.57 million shares.
ALSMY closed Wednesday's trading at $3.32, up $0.16 or 5.06 percent on a volume of 2.23 million shares.
by RTT Staff Writer
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