GE Offers $389M for Alstom's India Units - Analyst Blog

According to media reports, General Electric Company GE has made a tender offer worth about $389 million to acquire a stake in two of Alstom SA's India units. This comes subsequent to its $16.9 billion bid to buy the French conglomerate's energy operations.

The proposal will be realized only if General Electric's bid to buy the French giant's energy unit goes through, as then the U.S. group will be required to launch a tender offer for Alstom's Indian businesses in order to conform to local regulations.

Alstom's flagship companies in India, namely Alstom India Ltd. and Alstom T&D India Ltd., have strong capabilities in manufacturing, engineering, project management and supply of products and solutions for transport infrastructure, power generation and transmission requirements. In case the Alstom's energy buyout is successful, General Electric will indirectly gain ownership of Alstom's 75% stake in Alstom T&D and 68.6% in Alstom India.

Per a regulatory notice submitted to Indian stock exchanges by the offer manager Credit Suisse, General Electric has presented an offer to acquire 25% in Alstom T&D India Ltd. from public shareholders for about $278 million.

A separate filing revealed that General Electric is looking to buy 26% of Alstom India Ltd. for about $111 million.

Last month, General Electric made a formal $16.9 billion bid to buy Alstom's power-generation and transmission businesses. A committee of independent directors is in the process of reviewing the U.S. conglomerate's proposal. The deal, in tune with General Electric's corporate strategy to return to its industrial roots, promises an excellent return on capital, supply chain efficiencies and deep synergies.

The transaction, if finalized, will be accretive to General Electric's earnings immediately, and the company expects to generate over $1.2 billion in annual cost synergies after five years.

Cash-strapped French engineering group Alstom is considering General Electric's offer for its energy arm. Should the deal be finalized, it would set to revive its transport business, aid repayment of debt and cash returns to shareholders. However, Alstom remains open to a counteroffer from German company Siemens AG SI, which filed a declaration of interest to Alstom's board last week.

If the deal materializes in General Electric's favor, it would mark the biggest acquisition ever for the company and significantly enhance its operations in a recovering Europe.

General Electric currently holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry that are worth considering include Federal Signal Corp. FSS and Noble Group Ltd. (NOBGY), both carrying a Zacks Rank #1 (Strong Buy).