LONDON – General Electric Co. is in talks to buy Alstom SA, the French builder of trains and power plants, people with knowledge of the matter said, in what would be GE’s biggest acquisition ever.
An agreement may be announced as early as next week, said the people, who asked not to be identified because the talks are private. The U.S. company may pay more than $13 billion for Alstom, one of the people said. That would be about 25 percent more than its current market value. Alstom surged as much as 18 percent in Paris trading today, the biggest jump since 2004.
The deal would give the U.S. maker of jet engines and locomotives control of Alstom’s technology for power transmission and power plant maintenance as Europe’s economy starts to revive. A purchase of Alstom, which is also the company supplying turbines for Deepwater Wind LLC’s 30-megawatt Block Island Wind Farm project, would be a rare example of a major French company being taken over by a U.S. rival.
“Acquiring Alstom would put an exclamation point on GE’s return to deals,” said Sanford C. Bernstein analyst Steven Winoker. “It is among the best fits we have seen with the GE portfolio for some time.”
GE has been shifting its focus toward units that make jet engines, locomotives and industrial equipment and shrinking the finance division, called GE Capital, which imperiled the company during the global financial crisis. Alstom, based in the Paris suburb of Levallois-Perret, has been selling assets to cut costs and reduce debt.
GE CEO Jeffrey Immelt would be able to tap the company’s foreign cash reserves to finance the deal, one of the people said. GE had about $89 billion in cash at the end of last year, including $57 billion held outside the U.S. Large infrastructure contracts increasingly require bidders to put up financing, putting Alstom at a disadvantage.
Fairfield, Conn.-based GE has the support of Alstom shareholder Bouygues SA, said the people. The French conglomerate owns about 29 percent of Alstom.
“Alstom is not informed of any potential public tender offer for the shares of the company,” it said in an emailed statement today. “The group constantly reviews the strategic options of its businesses.” Seth Martin, a spokesman for GE, declined to comment. A Bouygues spokesman said the company supports Alstom and its strategy. He added that Bouygues doesn’t control Alstom, declining to comment further.
Alstom shares surged as much as 4.35 euros to 28.69 euros in Paris and were up 13 percent as of 11:17 a.m. Before today, the stock had dropped 20 percent over the past year, making it a cheaper target for GE.
Immelt said this month that GE is looking to make acquisitions in the range of $1 billion to $4 billion and will spend more for targets “that have excellent values, strong synergies, fit our growth strategies and are immediately accretive.”