GE’s €12bn deal puts Alstom in pound seats

GE’s €12bn deal puts Alstom in pound seats :Alstom, the French company selling most of its energy-equipment businesses to General Electric (GE) to focus on train making, may return as much as €4bn to shareholders after the deal.

The €4bn railway order from SA contributed significantly to the return. Its Alstom Southern African Holdings is also part of the Gibella consortium that won a R51bn contract from Prasa to deliver 600 Alstom trains consisting of six wagons each.

The first 20 trains are being manufactured at Alstom’s Lapa plant in Brazil‚ with delivery scheduled from late next year.

The remaining 580 will be produced at a purpose-built manufacturing plant near Nigel‚ Gauteng‚ from 2017.

Alstom’s board proposes that the company keeps two-thirds of the €12.35bn coming from the GE transaction to cut debt and strengthen its balance sheet, it said in a statement on Thursday. The remainder could be distributed to shareholders via a share buyback, it said.

Alstom, based in the Paris suburb of Levallois-Perret, agreed to sell most of its energy division to GE in June amid slowing demand for power plants in Europe and rising competition from Asian manufacturers. Alstom also plans to use the proceeds to expand its rail division and create energy ventures with GE.

“The board wishes to ensure a solid financial structure for the group in order to address future operational needs and support its development,” Alstom said.

Shareholders will vote on the deal at a meeting on December 19.

The French company has already signed the final agreements with Fairfield, Connecticut-based GE after completing consultations with works councils, which represent the company’s employees.

The company expected to complete the disposal in the second quarter of next year, and would thereafter maintain a “cautious” dividend policy, CEO Patrick Kron said this month. Alstom would look at acquisitions in areas such as signaling and maintenance “in an opportunistic manner”, though “there is nothing cooking”, he said.

The stock gained as much as 4.2% in Paris trading on Thursday.

The French company earlier this month predicted rising revenue after fiscal first-half orders doubled to a record.

GE’s €12bn deal puts Alstom in pound seats

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