General Electric Company (NYSE:GE) has received a series of antitrust concerns from the EU Commission with regards to its plans to acquire the Alstom energy business.
GE’s intent to purchase Alstom’s energy business was confirmed in 2014 after Alstom’s board unanimously selected General Electric as the successful contender. The subject business is a power and grid system whose worth is estimated at $13.5 billion. The EU Commission is worried that the deal might give GE too much a competitive advantage over the other market players.
The EU Commission fears that only two strong competitors will remain once the deal goes through, and that includes GE and Siemens AG (ADR) (OTCMKTS:SIEGY). General Electric is currently trying to figure out which steps to take and where to compromise so that the deal can be allowed. There is still hope that GE will get strike the deal. Sending out a list of concerns does not necessarily mean that the deal is off the table. It is simply to give the acquiring company a heads-up on what to review before they hold talks to discuss the matter.
The Alstom deal is vital for the company as it makes efforts to venture more into the industrial line of business. It is also in sync with the shareholder’s decision to divest its banking portfolio so that it can focus its attention on the core business. There a few other reasons why GE is bent on pursuing this acquisition. One of them is the fact that the two firms have technologies that complement each other.
In financial terms, GE expects to save costs worth $1.8 billion through the new deal. The company also expects 40% additional cost savings from SG&A consolidation. Another 40% will come from improved manufacturing strategies employed by both firms. The remaining percentage will be derived from the efficient and effective utilization of resources. It is, therefore, an opportunity that investors would not want to pass. Therefore, General Electric Company (NYSE:GE) is ready to do what it takes to receive authorization for the acquisition.
