The real winners in the General Electric Company (NYSE:GE) deals to acquire Alstom are Siemens AG and Mitsubishi Heavy Industries, Ltd., Peter Sorrentino said in a recent interview with CNBC.
General Electric Company (NYSE:GE) recently overcame the last hurdle in its bid to buy Alstom’s energy business after Bouygues SA agreed to sell part of its stake to France, a condition set by the French government in order for the deal to push through. The GE acquisition is estimated to cost around $17 billion.
Siemens AG and Mitsubishi Heavy Industries, Ltd. made a proposal to buy Alstom after the French government initially balked at General Electric Company (NYSE:GE) buying the French firm’s energy business, a move the country can make as it is legal for the government to intervene in acquisitions of companies that are seen to have national significance. The deal will result in GE being a partner in joint ventures which will also feature Alstom as an equal partner.
According to Sorrentino, Huntington Asset Advisors senior portfolio manager:
“I think the winner in all of this is Siemens and Mitsubishi. This deal got done with a number of compromises. It lowers the risk for GE in the way that the deal finally came out less legacy risk but again, as was pointed out, these are now joint ventures. It’s got a lot more in terms of moving parts and political characteristics to it. I think shareholders ought to take a cautious eye looking at this deal.”
Sorrentino added that General Electric Company (NYSE:GE) posed less of a job security risk to the people of France which may be why the government allowed the company to make the acquisition. Furthermore, GE is in a lot of the same businesses with the same customers as Alstom has, he said. He also noted that Siemens AG and Mitsubishi Heavy Industries Ltd. posed more of a risk for job cuts had they been successful in their bid. GE has promised that it will create about 1,000 more jobs in France because of the deal.
Watch the full discussion below.
General Electric Company (NYSE:GE) investors includes Warren Buffett’s Berkshire Hathaway which reported about 10.59 million shares in the company by the end of the first quarter. Another investor is John A. Levin’s Levin Capital Strategies which reported about 9.5 million shares in the company during the same period.