Alstom: Excerpts from Wikipedia

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This article may be expanded with text translated from the corresponding article in French. (February 2018)Click [show] for important translation instructions.

Alstom SA is a French multinational rolling stock manufacturer operating worldwide in rail transport markets, active in the fields of passenger transportation, signalling, and locomotives, with products including the AGV, TGV, Eurostar, Avelia and New Pendolino high-speed trains, in addition to suburban, regional and metro trains, and Citadis trams.

Alsthom (originally Als-Thom) was formed by a merger between Thomson-Houston Electric Company and the electric engineering division of Société Alsacienne de Constructions Mécaniques in 1928. Significant later acquisitions included the Constructions Electriques de France (1932), shipbuilder Chantiers de l’Atlantique (1976), and parts of ACEC (Belgium, late 1980s).

A merger with parts of the General Electric Company (UK) formed GEC Alsthom in 1989. Throughout the 1990s, the company expanded its holdings in the rail sector, via the acquisition of German rolling stock manufacturer Linke-Hofmann-Busch and Italian rail signalling specialist Sasib Railways. In 1998, GEC Alsthom was floated on the Paris Stock Exchange and, later that year, it was rebranded Alstom.

In 2003, the company required a €3.2 billion state-backed bailout from the French government. As a result, Alstom was compelled to dispose of several of its divisions, including shipbuilding and electrical transmission to Nikhanj Power, in order to comply with European Union rules on state aid. It was able to re-acquire its electric transmission division in 2010.

In 2004, Alstom was again in financial difficulties, having incurred massive unexpected costs (€4 billion) arising from a design flaw inherited from the acquisition of ABB Group‘s turbine business, in addition to losses in other business sectors.

In 2014, Alstom and General Electric (GE) announced that a US$17 billion (€12.4 billion) bid for Alstom’s power and grid divisions had been made and provisionally accepted. Amid controversy in France over the proposed takeover of strategic domestic interest by a foreign company, GE’s bid was modified to include joint ventures in power generation and transmission, as well as GE’s rail signalling business being sold to Alstom. The acquisition of the power and grid division by GE was accepted by EU and US competition authorities in 2015, subject to Alstom’s heavy gas turbine business being sold. The sale of Alstom’s power generation and transmission businesses to GE was finalised on 2 November 2015, since which the Alstom Group has operated solely in the rail sector.

In late 2017, Alstom announced a proposed merger with Siemens Mobility of Germany. However, in February 2019, the European Commission prohibited the merger. Subsequently, in February 2020, the company signed a letter of agreement to purchase Bombardier Transportation. The purchase was finalized on 29 January 2021 and Bombardier‘s Transportation business became a part of Alstom.

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Judicial troubles

Starting in 2009, Alstom’s practices are questioned by the United States Department of Justice (DOJ), which violated the 1977 Foreign Corrupt Practices Act. This American law has extraterritorial scope. At the time, Alstom seemed to cooperate with the proceedings.[40]

In 2010, the DOJ opened an investigation into Alstom commercial practices, especially on a 2003 deal in Indonesia worth 118-million dollars.[41]

On April 13, 2013, Alstom senior executive Frédéric Pierucci was arrested at the John F. Kennedy International Airport in New York. He was accused of willful blindness of his company’s suspected corruption. He was imprisoned in a high security prison facility for 14 months and denied release on bail until the week of Alstom’s acquisition by the US conglomerate General Electric.[42][43]

In late 2014 Alstom was fined $772 million by the United States Department of Justice, and admitted guilt (under the Foreign Corrupt Practices Act) in relation to bribes paid to obtain contracts in various countries.[44][45]

In mid 2014 Alstom Network UK was charged by the UK Serious Fraud Office (SFO) in relation to corruption offences alleged to have been committed when obtaining transportation contracts in India, Poland and Tunisia, covered under sections 1 of the Prevention of Corruption Act 1906 and Criminal Law Act 1977.[46] Further charges were brought in late 2014 by the SFO in relation to corrupt practices used to obtain energy contracts in Lithuania.[47] Additional charges relating to contracts for the Budapest Metro in Hungary were added in April 2015.[48]

Acquisition by General Electric

On 24 April 2014, unconfirmed reports claimed that US conglomerate General Electric (GE) was in acquisition talks with Alstom for $13 billion with the support of 29%-shareholder Bouygues, causing Alstom’s share price to rise 18% in one day.[49] On 27 April, Le Figaro reported that a rival ‘cash plus asset swap’ offer was issued by Siemens, trading Alstom’s power business for part of its rail arm, plus a cash offer as good as GE’s and job guarantees.[50][51] Siemens’ bid was reportedly promoted by French economic minister Arnaud Montebourg. Siemens and Alstom had a greater product overlap and thus a greater risk to jobs, along with potential issues with EU competition regulators.[51][52] Siemens’ offer was characterised as “defensive”, being skeptically received by investors and analysts.[53][54]

On 29 April, Reuters reported that Alstom’s board had accepted a €10 billion bid by GE for its energy division;[53] In a letter from GE executive Jeffrey R. Immelt to President François Hollande published in Les Echos, Immelt gave assurances about continued investment in Alstom’s French activities, the security of the civil nuclear sector, and on job commitments made by Alstom Wind, whilst making its wind activities available to investors.[55] On 30 April, Alstom confirmed that an offer for its power and grid divisions (representing an equity value of €12.35 billion, €11.4 billion enterprise value) was under review with key interests including the French state. On 30 April, GE confirmed it had made an $16.9 billion offer, comprising a $13.5 billion value plus $3.4 billion cash. On 5 May, GE offered to buy one-fourth of the shares in Alstom’s Indian power and distribution companies – Alstom T&D India and Alstom India – at 261.25 and 382.20 rupees a share (value US$278 million and $111 million respectively) subject to its bid for Alstom SA being successful.[56]

On 5 May 2014, the French government stated it did not back GE’s bid, citing concerns on the future of Alstom’s rail division as a smaller separate entity, suggesting that GE transfer its own rail division to Alstom; other concerns were over the civil nuclear field’s national independence, and French jobs.[57] On 14 May, France issued a decree (Décret n° 2014-479 du 14 mai 2014.[note 1]), nicknamed “décret Alstom“, extending to power of the state to veto the takeover of “strategic interests” into areas of energy supply, water, transport, telecoms and public health.[62][63] Both the French employer organisation MEDEF and the European Commissioner for Internal Market and Services (Michel Barnier) responded negatively to the decree.[62][63]

On 16 June Siemens and Mitsubishi Heavy Industries (MHI) submitted a competing offer for Siemens to acquire Alstom’s gas turbine activities for €3.9 billion while MHI would form joint ventures with Alstom, acquiring 40%, 20% and 20% stakes in Alstom’s steam and nuclear, electrical grid, and hydroelectric businesses respectively, for €3.1 billion. The proposal included an offer to buy a further 10% stake from shareholder Bouygues and an option to form a rail transport joint venture.[64] On 19 June, GE revised its bid, matching the same price with a lower cash transaction value; it also proposed forming a joint venture of their renewable, electric grid, steam turbine and nuclear power businesses. GE announced a memorandum of understanding between the two firms in the rail sector and the sale of GE’s rail signalling unit to Alstom.[65] On 20 June, Siemens and MHI modified their bid, with MHI increasing its stake in Alstom’s steam, hydro, and grid businesses to 40% in all three (total €3.9 billion) while Siemens increased its offer by €400 million to €4.3 billion. Subsequently, Economy minister Arnaud Montebourg stated he would block both bids, but the French government backed GE’s offer and had given GE more specifications on commitments and guarantees; it also intended to buy two-thirds of Bouygues’ shareholding (20%).[66] The next day, Alstom’s board backed GE’s revised bid.[67][68] On 22 June, the French state agreed terms with Bouygues, buying a 20% stake in Alstom from Bouygues at a 2–5% discount on a minimum value of ≈€35 per share.[note 2][69][70][71]

Initially the acquisition was expected to be finalised by early 2015.[69] In early 2015, the EU Competition Commission began examining the deal.[72] Both EU and US competition regulators approved the deal by September 2015, subject to the divestiture of Alstom’s large and very large gas turbine (GT26 and GT36 models) manufacturing and service business; and its GE7FA gas turbine aftermarket parts subsidiary business, Power Systems Mfg. LLC (PSM), to another company, Ansaldo Energia.[73]

The sale of Alstrom’s energy division to GE was finalised on 2 November 2015; the final valuation being €12.4 billion, of which €9.7 billion was transferred to Alstom, the remainder being reinvested in GE/Alstom joint ventures plus other corrections. The acquired businesses were reorganised within GE’s existing power generation business (GE Power & Water) as GE Power. The remainder of Alstom Group, including GE Signalling (acquired via a €700 million deal), refocused on rail transport. Due to the acquisition, GE accrued $17.3bn of goodwill, consisting of Alstom’s negative book value of $7.2bn at the time of acquisition and the $10.1bn purchase price. In October 2018, GE wrote-off $23bn from the value of its power industry division, largely attributed to the Alstom purchase.[74]

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https://en.wikipedia.org/wiki/Alstom

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