GE makes open offers for shares in 2 Alstom units

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US firm to spend Rs 2,341 cr in India for French firm takeover

General Electric on Monday made open offers to buy shares worth up to Rs 2,341 crore in two of Alstom’s Indian units – Alstom T&D India and Alstom India – to comply with the domestic rules following its $17 billion bid last week to buy the French group’s energy unit.

GE has offered to buy 25 per cent in Alstom T&D India from public shareholders at Rs 261.25 apiece at a total cost of Rs 1,673 crore, a filing on the domestic stock exchanges said.

The US firm is also seeking to buy 26 per cent of Alstom India at Rs 382.20 apiece for up to Rs 668.05 crore, it said in a separate filing. GE will proceed with the offers only if its bid for Alstom’s energy arm goes through, the filings said.

Alstom, the cash-stra­pped French engineering group, said last week it would explore a $16.9 billion offer from GE for its energy arm while leaving the door open to a rival bid from Germany’s Siemens, Reuters reported.

Shares of Alstom India hit a high of Rs 466.80 in intraday trade on Monday, before closing at Rs 457.50, up 0.70 per cent or Rs 3.20 a share. Alstom T&D hit an intraday high of Rs 291.90 apiece, before closing at Rs 270, down 0.44 per cent or Rs 1.20 a share.

Alstom India operates in rail, hydropower and boiler manufacturing segments while Alstom T&D is in the T&D business. Alstom has a licencing tieup with BHEL for manufacturing of supercritical boilers and a join venture with Bharat Forge for manufacturing supercritical turbines.

If its bid to buy the French group’s energy unit is successful, GE will indirectly acquire Alstom’s 75 per cent stake in Alstom T&D and 68.56 per cent in Alstom India. This would require the US group to launch tender offers as per Indian market regulations.

The Alstom board of directors has received the Alstom offer positively and appointed a committee of independent directors to review it by June 2. “If this review concludes positively, an exclusivity period beginning not later than June 2 will be granted and the next steps will include consultations with Alstom employees representatives, a meeting of Alstom shareholders to approve the deal, and customary regulatory approvals,” the offer said.

GE and Alstom on April 30 announced that the former had made a binding offer to acquire the thermal power, renewable power and grid businesses of the latter.

Although the Alstom offer involves the acquisition of the power and grid businesses, the offer, typical of a public company transaction, permits the company’s board to consider unsolicited alternative proposals for the acquisition of Alstom, or of the power and grid businesses. “Subject to the above, the acquisition of the power and grid businesses is expected to close in 2015,” the filings said.

“If the deal was to be confirmed, due to the change in the ownership clause, the listed entities of Alstom in India would have to launch mandatory open offers to buy 20 per cent of their outstanding shares, similar to that in the case of Alstom T&D when Areva sold its transmission business to Alstom,” Barclays analysts led by Venugopal Garre said.

“It could have some impact on the existing licencing agreement with BHEL, including renegotiation of licence fees and royalty in case the terms of the contract with BHEL do not have a change of ownership clause,” the Barclays analysts said. However, the analysts do not expect to see much impact on the Bharat Forge-Alstom JV, as it is an unlisted subsidiary. “In fact this joint venture could get strengthened further given the large global access the combined will have,” they said.

Another analyst at a foreign brokerage said June 2 will be a crucial date, as Siemens will have to come out with a counter-offer by then. On the price of the open offer, he said Alstom India and Alstom T&D are expensive stocks, which are trading at 30-40 times earnings.


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