The European Commission today (8 September) gave its blessing to GE’s partial takeover of Alstom’s power generation portfolio.
The US-based company, formerly known as General Electric, must sell the French company’s heavy duty gas turbines business to Ansaldo.
At €12.4 billion, the acquisition represents GE’s largest ever takeover, according to Reuters.
“This is a big deal,” EU Competition Commissioner Margrethe Vestager said.
The green light proved that the EU “welcomes your business, but we want you to compete,” she told reporters in Strasbourg.
Today, the US Department of Justice filed a proposed consent decree that would permit the acquisition to close. The US firm expects to complete the transaction as early as possible in the fourth quarter.
“We have addressed the Commission’s and Department of Justice’s competition concerns while preserving the strategic and economic drivers of the deal”, said GE Chairman and CEO Jeff Immelt.
Vestager said that the Commission’s analysis found that 95% of the merger was not problematic.
The thermal power generation businesses (other than gas), grid and renewables did not trigger any competition concern as the activities of the two companies are complementary and do not overlap.
But the antitrust chief added that it is important that Alstom’s turbine portfolio was divested.
GE is the world’s largest manufacturer and Alstom is the number three or four player globally. The Commission initially warned that without the divestiture of strategic parts of Alstom’s gas turbines, the deal would have reduced competition to two major players, GE and Germany’s Siemens.
European consumers would have paid higher energy prices and innovation would have shrunk in a key market to fight against climate change, Vestager said.
Advanced heavy duty gas turbine technology is “the most efficient, cleanest and flexible fossil fuel power generation technology, and an important complement to more unpredictable generation from renewables – when the wind stops blowing it is mostly flexible gas-fired plants that can step in,” Vestager added.
Although she recognised that Ansaldo is not a big player in the market, GE’s assets would give the Italian company a “fighting chance”.
Ansaldo is 40% owned by Italian state-backed investment fund Fondo Strategico Italiano and another 40% by China’s Shanghai Electric.
“We were looking for the right part of the portfolio to enable competition,” Vestager stressed.
The Danish commissioner admitted that it is hard to say how jobs will be affected in France.
“What is important for us is that the EU technology pass on to allow innovation,” she added.
She also welcomed the “very good cooperation” with the US antitrust authorities over the last months.
“We have gone a very, very long way with transatlantic cooperation since GE tried to acquire Honeywell at the beginning of the millennium. Things have changed.”
In 2001, the Commission blocked GE’s takeover attempt of Honeywell on competition grounds.
General Electric's €12.4 billion bid for Alstom's power equipment came under close scrutiny by the European Commission, which opened a full-scale antitrust investigation into the deal on 23 February.
The Alstom deal is part of GE's efforts to increase its focus on industrial operations and away from finance. However, the takeover would remove one of GE's three main rivals in heavy-duty turbines used in gas-fired power plants, the Commission said at the time. This could lead to price rises, EU antitrust regulators warned, piling pressure on the US conglomerate to offer concessions.
The Commission said it is worried that GE would discontinue the production of certain models of Alstom heavy duty gas turbines (HDGTs) and not bring to the market the French company's advanced HDGT technology.