French turbine and rail company Alstom was at the centre of frenzied takeover speculation today as reports of a $13 billion (£7.7 billion) bid from US giant General Electric sent the shares racing 18% higher.
Alstom said it was “not informed” of any potential approach, but traders bet otherwise as the stock made its biggest leap in ten years on hopes of what would be GE’s biggest swoop under deal-hungry chief executive Jeffrey Immelt. Alstom is “constantly reviewing” its strategic options, the company added.
A tie-up would give GE, which makes jet engines and trains, control of Alstom’s TGV high-speed trains and rail signalling technology as Europe recovers. The deal is said to have the backing of Alstom’s biggest investor, the French conglomerate Bouygues, but may excite the same French protectionism that blocked Pepsi’s buyout of Danone several years ago.
Alstom has over 92,000 staff in 100 countries but is best known in the UK for making Tube carriages and the leaning Pendolino trains used on the West Coast Main Line. Around a third of all rail journeys are made on its rolling stock and its generating equipment powers half of the UK’s power stations.
Its nuclear steam turbines have just been selected by France’s EDF for its new power station at Hinkley Point in Somerset.
Alstom employs 6,500 staff in the UK, where the company and its predecessors have been in business for 200 years. Its industrial heritage includes Robert Stephenson & Co — behind the famous Stephenson’s Rocket locomotive.
But recent struggles at Alstom have made it vulnerable to a bid, with the shares down 20% in the past year after two profit warnings, prompting 1,300 job cuts and as much as €2 billion (£1.4 billion) in asset sales by the under-pressure chief executive Patrick Kron.
In contrast GE, which has been shrinking its finance division to concentrate on aircraft, trains and industrial equipment, beat Wall Street expectations with its first-quarter results. A series of disposals has given Immelt a multibillion-dollar war-chest to add to big deals like its £5.7 billion acquisition of UK medical research firm Amersham in 2003. In 2010 it paid £800 million for the UK oil and gas services business Wellstream, although it lost out to Schneider Electric in the battle for engineering group Invensys last year.
