By Tom Fairless And Ted Mann
BRUSSELS--The European Union threw down a hurdle to General
Electric Co.'s $17 billion acquisition of France-based Alstom SA's
energy businesses, saying it would investigate in detail whether
the proposed deal could lead to higher prices for large gas
turbines.
Such in-depth investigations by regulators in Brussels aren't
unusual and often don't significantly affect proposed tie-ups. But
the move injects fresh uncertainty into GE's biggest ever deal, 14
years after EU regulators blocked the U.S. company's $43 billion
bid for Honeywell International Inc.
GE beat out a rival offer for Alstom's energy assets from German
engineering giant Siemens and Mitsubishi Heavy Industries Ltd. last
summer, in a highly public tug of war that roiled the French
business world. The deal, a rare instance of a large French company
being acquired by a U.S. rival, ultimately required specific
approval from the government in Paris.
The European Commission, the EU's top antitrust authority, said
Monday it was concerned that the transaction could limit
competition in the market for heavy-duty gas turbines, which are
mainly used in gas-fired power plants. It said the transaction
would eliminate "one of the three main global competitors to GE" in
the market--the other being Siemens.
"We are concerned that the proposed acquisition might not only
lead to higher prices but also result in less choice for customers
and less innovation in the sector," the EU's antitrust chief
Margrethe Vestager said in a statement. A final decision on the
deal is now due by July 8, the commission said.
A GE spokesman said the company disagreed that the deal could
lead to increased prices and less competition for gas turbines in
Europe, and said it still aimed to close the transaction by
mid-2015.
"We believe...that the gas turbine market is both global and
highly competitive," GE spokesman Seth Martin said in an email
message. "We disagree with the preliminary concerns raised by the
EC statement today and Phase II is the normal process for
engagement on these issues."
GE Chief Executive Jeff Immelt told investors in December that
the company was aiming to close the Alstom deal by July 1. The
company said the July 8 deadline for completion of the European
Commission review didn't meaningfully change that timeline.
The EU's decision to focus on the market for heavy-duty gas
turbines was widely expected, said Anne MacGregor, an antitrust
lawyer with Cadwalader, Wickersham & Taft LLP in Brussels. The
regulator is now likely to seek to define the precise geographic
scope of that market, to establish the level of competition, she
said.
While four large companies compete globally to produce
heavy-duty gas turbines--GE, Alstom, Siemens and Mitsubishi Hitachi
Power Systems--the commission said the latter seemed to be less
active in the European Economic Area than in the rest of the
world.
"If the market is really only EEA-wide, and Mitsubishi Hitachi
Power Systems is not a strong fourth player in the EEA, that is not
a great place to be for the merging parties," Ms. MacGregor
said.
Siemens is likely to be "very engaged" with the European
Commission as an interested third party, and to have received
"bulky questionnaires and other information requests" aimed at
teasing out the details of the market, she added.
The commission said the deal was "not likely to raise concerns
in relation to power generation equipment for nuclear, coal-fired,
wind and hydro power plants, as well as in relation to electricity
transmission equipment.
Last month, Alstom Chief Executive Patrick Kron said he expected
only "limited overlaps" where European regulators might require
that the company divest operations for competitive reasons.
Write to Tom Fairless at tom.fairless@wsj.com and Ted Mann at
ted.mann@wsj.com
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