GE makes its pitch for Alstom acquisition to the EC this week

The European Commission must make its decision by early August regarding GE’s proposed acquisition of Alstom’s energy and grid business. The EC’s concerns have held this deal up for the best part of a year. I estimate that financial closure for this deal is now no longer possible at least till the end of 2015. The EC sent GE its “statement of objections” in the middle of June. This week (tomorrow) GE will be attending “hearings” at the EC at its own request. The hearings are to be “oral” and the meetings are “closed-door”.

It seems to me that this is more of a negotiation rather than a “formal” hearing. Clearly GE will be exploring how far it needs to go in its final, written submissions which will be needed before the EC can make any formal adjudication in August. I suspect that GE might be considering “creative” alternatives for making IP from Alstom, which it judges it does not – and will not – need, available to other “serious” players. One difficulty is that a lot of IP has value in creating a barrier for others, rather than being usable in its own right. I also suspect that GE is looking to ensure that the revenue stream from the service of Alstom’s fleet of operating gas turbines is not impaired by being forced to give up part of that business. And to do that GE may be considering ways and means of assuring the EC that the pricing of such service business will be “reasonable” and not predatory.

Personally I think that many of the EC’s fears are imaginary or theoretical. They are quite insignificant compared to some of the predatory pricing and price-fixing that is evident in other industries. But then my own opinion is that it is better not to have a competitor in the market place rather than for a “sick” or reluctant competitor to be forced to continue. That only encourages distortion of the market place to the ultimate detriment of OEM’s and customers and eventually consumers. Moreover, R & D for advanced gas turbine technology will, I think, be served best by the deal going through.

According to Reuters, General Electric, the EC, other EU agencies, and parties opposing the deal will take part in a closed door hearing this Thursday, July 2.

Reuters:

Senior officials from the EU competition authority, their counterparts from EU agencies and rivals are expected to attend the closed-door hearing.

“We have requested an oral hearing,” GE spokesman Jim Healy said. He said the hearing would be on July 2.

French Economy Minister Emmanuel Macron has said the deal should be viewed in a global perspective and take into account Chinese rivals following the EU regulator’s decision to exclude the Chinese market from its scrutiny of GE’s market power.

The Commission is concerned the takeover would leave just two gas turbine companies in Europe, with GE competing only with Germany’s Siemens.

The EC has not announced who the objectors are but I expect that Ansaldo Energia (40% owned by Shanghai Electric) and Siemens are among those opposing. I can well see that Ansaldo/Shanghai would be looking to be able to access some of Alstom’s IP to help them to bridge the not inconsiderable technology gap they must overcome to even have a chance of becoming a major player in the Heavy Duty Gas Turbine market. Siemens, I am sure, would object as a matter of principle even if they will actually benefit from the deal. I am not sure if Mitsubishi-Hitachi has a presence large enough to have any locus standi as an objector in Europe. The Siemens/Wood Group JV (Turbo Care) which focuses on the service of non-Siemens gas turbines is likely to be a principle objector but in this case it is essentially a “pirate” and, hopefully, will not be given too much credence.

Patrick Kron, CEO of Alstom is very bullish – but then, of course, he can hardly be anything else.

Bidnessetc: Alstom SA chief executive Patrick Kron remains bullish that General Electric Company will successfully acquire its energy unit and will also have the European Union (EU) regulatory authorities’ approval. Mr. Kron’s statement came as General Electric has requested the EU antitrust authorities to conduct a hearing with the aim to get their approval.

The EU has been holding back General Electric’s request to acquire Alstom’s energy unit for the last few months, as it is investigating the effects of the acquisition on the European market. However, Mr. Kron said in an interview to a newspaper yesterday: “I hope that we are now in the final leg and I am confident … My position is very clear. I do not see why Plan A would not work out.”

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One Response to “GE makes its pitch for Alstom acquisition to the EC this week”

  1. GE close to getting EC approval for Alstom acquisition | The k2p blog Says:

    […] a closed door meeting on 2nd July with the EC to explore the EC’s concerns over its acquisition of Alstom’s power and […]

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