NEW YORK – The head of General Electric said on Wednesday talks with the French government on its offer for Alstom's energy assets had been "productive" and expressed confidence that the deal would go through despite a potential rival offer from Germany's Siemens.
Continue Reading Below
"We think we've got a good deal and it's going to be executed," Chief Executive Jeff Immelt told reporters on a conference call.
"This is just the beginning of the process and we move on from here."
Immelt was speaking from Paris where he held talks earlier this week with French President Francois Hollande, who has said the government will focus on preserving jobs in any deal to prop up the struggling train and turbine maker.
"We have had good, productive two-way dialogue this week" with the French government, Immelt said.
"We think net employment in France will grow around the Alstom assets," including with a focus on more manufacturing and engineering jobs.
Continue Reading Below
"I wouldn't say it was pressure," Immelt added about talks with the French government. "I would say it was very interested, active, good discussions, and I spent time listening to their concerns and interests."
Alstom said earlier it would review the binding offer from GE for its energy business by the end of May but left the door open for a competing bid from Siemens.
Immelt said Alstom Chief Executive Patrick Kron had initiated the talks with a phone call and the two CEOs met for a "casual dinner" in mid-February.
"We went back and studied it on our own for a couple of weeks and then in the middle of March we engaged, and engaged intensely for that time period," Immelt said. "Pretty quick in terms of the whole process."
Immelt characterized Alstom as a "European company whose market is the world really. The resources and the reach of Alstom are far beyond France and far beyond Europe."
While Immelt said the outlook for the European power market was still "tough," the CEO said the company was "still pretty bullish" on the prospects for the global power market.
Immelt noted France has been an important hub for the U.S. conglomerate's aviation, power and healthcare businesses.
He cited the company's long-standing CFM jet engine joint venture with France's Safran, which is seen as a potential trump card in GE's efforts to gather support for the politically sensitive bid.
"GE has had a significant role in France for a long time," Immelt said. "The company has always had, I'd say, a big profile
in the country, because of CFM and just the variety of our activities."
A person familiar with the talks said Immelt had directly raised CFM's success as the world's largest supplier of jet engines in his meeting with Hollande on Monday.
French Prime Minister Manuel Valls reacted cautiously to Alstom's announcement of formal talks with GE, however.
"There are no exclusive discussions: that's what is crucial as far as I am concerned," he said on France Inter radio.
"They heard our point of view - that is the main thing."
After speaking with reporters, Immelt and other GE executives laid out the case to analysts for the offer, which GE valued at $13.5 billion excluding cash.
The acquisition is expected to increase the U.S. conglomerate's earnings contribution from industrial businesses from 55 percent last year to 75 percent by 2016 - a new goal up from 70 percent previously.
"Over time I want industrial to be bigger, and I would say this gives us an opportunity to reset the bar," Immelt said on the analyst call.
On bulking up in the power sector, GE noted global demand for electricity is expected to increase by 50 percent by 2030.
Alstom will increase GE's installed base of power assets by 35 percent, allowing GE to generate more revenue from services, which carry higher profit margins than sales of original equipment. The deal gives GE more heft with gas and steam turbines, and a leading position in hydro power.
The deal will add $10 billion in emerging market revenue to GE, about half of Alstom's overall revenue from its power business.
GE shares rose 0.3 percent in morning trading in New York after the deal was announced. The stock is up about 1.6 percent since news of GE's interest in Alstom first leaked last week, outpacing a slight rise for the broader U.S. markets.
(Additional reporting by Mark John, Tim Hepher; Editing by James Regan and Meredith Mazzilli)