General Electric (GE) is on the verge of pulling off what would be the company’s biggest acquisition ever, as it emerged that it is in discussions to purchase French power equipment manufacturer Alstom for as much as $13bn.

Bloomberg reports that an agreement could be struck as early as next week. If the acquisition does go ahead, the $13bn figure would represent around 25 per cent more than Alstom’s (Euronext: ALO) current market value.
Jeff Immelt
According to the news agency, Alstom’s 20 per cent share drop over the past year has made it a cheaper target for GE (NYSE: GE) Chief Executive Officer Jeffrey Immelt (pictured).

GE will use its foreign cash reserves to finance the deal, an insider told Bloomberg. GE had about $89bn in cash at the end of last year, including $57bn held outside the US.

GE has been increasing its focus on manufacturing engines and industrial equipment and reducing its finance division, GE Capital. Meanwhile Alstom has in recent times been selling assets to cut costs and reduce debt.

Insiders also revealed to Bloomberg that GE has the support of one of Alstom’s biggest shareholders, Bouygues SA, which owns 29 per cent of the company.

Officially Alstom have denied knowledge of the story. In a statement, Alstom said: “In response to recent speculation in the economic press, Alstom is not informed of any potential public tender offer for the shares of the company. The group constantly reviews the strategic options of its businesses.”

Alstom is the world leader in turbines for dams, while it lags GE and Siemens AG in gas turbines. It is the third-largest maker of power transmission gear after ABB Ltd. and Siemens, and competes with the German company and Canada’s Bombardier Inc. in the market for trains and other rail equipment.

The recession in Europe has impacted severely on Alstom’s thermal power equipment business and CEO Patrick Kron announced plans to sell around EUR2bn of assets in its rail unit as well as the shedding of 1300 jobs as it had continued to adapt to changing circumstances.

The French company is pushing for savings in Europe while investing in partnerships and plants in countries such as China, Russia, Brazil, India and South Africa to tap demand for trains and turbines.

GE and Alstom have already held talks with French government officials about the proposed takeover to preemptively address potential political concerns, one of the people familiar with the situation said.

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