Last night news broke that General Electric (GE) had made a formal bid for Alstom’s (ALSMY) thermal, renewable, and grid businesses. Of course, Siemens (SI) has a month to make a bid of its own, but General Electric is currently sitting right where it wants to be.
Agence France-Presse/Getty Images Nomura’s Shannon O’Callaghan and team asses the impact of General Electric’s bid for Alstom:
The $13.5B enterprise value represents 7.9x standalone EBITDA and 4.6x after $1.2B of synergies that GE expects (~6% of sales). Alstom's companion announcement and conference call indicates that GE will absorb EUR 0.9B of net liabilities, including EUR 1.2B of pension liabilities, and will also take on potential FCFA litigation payments. If we assume EUR 1B for litigation liability and include the pension and other net liability, we estimate the implied EV/EBITDA multiples would be 9.4x pre-synergies and 5.5x post synergies. We estimate the post synergy ROIC's at 12% before these liabilities and 10% after (assuming 35% tax rate although GE will likely achieve a better rate). The $1.2B synergy target is to be realized by year 5 and strikes us as achievable. GE indicated that this transaction effectively completes their M&A for 2014 and 2015, as well as noted that, aside from the buyback/share exchange related to the Retail Finance transaction, additional buyback will only be in an amount required to offset employee plan dilution.
Shares of General Electric have gained 0.3% to $26.83 at 11:18 a.m. today, while Alstom’s ADR has risen 2.8% to $4.04 and Siemens has advanced 2.1% to $131.60.
No comments:
Post a Comment