GE makes Rs 2,340-cr open offer for Alstom's India units

Move subject to global takeover of Alstom's energy assets; discounted price offer fails to enthuse market

US energy and healthcare giant General Electric Company (GE) has proposed a Rs 2,340-crore open offer to acquire the publicly-held shares in Alstom India and Alstom T&D, following its $16.9-billion bid to acquire the global energy assets of the French multinational company. The conclusion of open offer is subject to a successful takeover by GE.

Alstom has two listed entities in India with business interests in power generation and the transportation (Alstom India) and transmission and distribution sector (Alstom T&D). The French parent owns a 68.56 per cent stake in Alstom India and 75 per cent in Alstom T&D.

On Monday, GE offered Rs 668 crore for 17.9 million shares (26 per cent of equity) of Alstom at Rs 382.20 apiece. This is a 16.49 per cent discount to the Alstom stock’s Monday closing price of Rs 457.50 on BSE.

Additionally, GE offered Rs 1,672 crore for 64 million shares in Alstom T&D (25 per cent of equity) at Rs 261.25 apiece. This is 3.3 per cent lower than Alstom T&D’s current stock price of Rs 270 a share.

 

The market reaction to the open offer announcement was muted, with the Alstom India scrip gaining only 0.70 per cent to Rs 457.50 and Alstom T&D losing 0.44 per cent, indicating a lack of investor interest in the price offered.

Last week, the Alstom board in France had announced it was considering GE’s purchase offer and appointed a committee under independent directors to review it. GE’s offer to Indian shareholders will happen only if GE completes the takeover and becomes the majority shareholder in Alstom India and Alstom T&D.

Siemens has also shown interest and made a competing bid to acquire Alstom’s energy business.

The acquisition of Alstom’s India firms would help GE expand its business footprint in the country, giving the US firm an entry into the transmission & distribution sector and air pollution equipment business, said industry sources.
It could also ramp up Alstom India’s facilities for business growth within the country, as well as for exports. Alstom has tie-ups with Bharat Forge for manufacture of steam turbines and a licensing pact with BHEL for super-critical boilers; industry experts believe these partnerships will continue after the acquisition, too.

“Indian power utilities are demanding higher-rated equipment, and the consolidation can create economic scale for more research and localising for domestic market needs. India could also emerge as an export platform for GE, especially in the T&D space,” said Kameswara Rao, energy & utilities head, PwC.

“The real jewel in the crown for Alstom in India is the listed business of Alstom T&D. Alstom’s global suitor will get this prized asset. But Alstom India with or without GE has already to contend with a host of local and foreign competition, such as BHEL, ABB, Crompton Greaves and Chinese equipment majors. That is unlikely to change anytime soon,” another analyst remarked.

Both power generation and distribution sectors in India are facing challenging times but experts say the contraction in business on the generation side has been higher. “A recovery in the transmission & distribution space will be quicker and GE will gain entry into the space,” said Sanjeev Zarbade, vice-president (Private Client Group Research), Kotak Securities.