When the commission launched its investigation in February, GE initially dismissed concerns related to market dominance. But the commission held its ground, stressing that any distortion of competition in the lucrative turbine business could have a harmful impact on European energy consumers.
Margrethe Vestager, the EU’s competition commissioner, said that the final approval showed that Europe was “open for business and that Europe-based technology can thrive and attract foreign investment” — delivering a riposte to US accusations that Europe’s competition enforcers are increasingly protectionist.
GE’s concessions to secure the deal focus on Ansaldo, a niche player in the turbine market. The commission had sought to bolster the Italian company because of fears that the GE-Alstom tie-up would mean it would have only two big rivals: Siemens and Mitsubishi Hitachi Power Systems.
“What we want, of course, is effective competition in a market that has a direct impact on the prices of electricity,” she added. “With this divestiture, it is possible to ensure that European know-how and innovation is preserved but also that there is room for future high-tech innovation in this area because Alstom’s previous work can continue in Ansaldo.”
The remedies include selling Alstom’s “PSM servicing” unit to Ansaldo. This business provides gas turbine components to GE, Siemens and Mitsubishi, and more than half its revenues come from servicing GE turbines.
GE will also hand over the intellectual property to build new GT-26 and GT-36 gas turbines to Ansaldo. It will also grant Ansaldo a servicing contract on 34 of Alstom’s 750 turbines around the world.
The US conglomerate said that the concessions were relatively small and the economics of the deal were preserved. The deal will still add 15 to 18 cents to GE’s earning per share by 2018 and the company said expected synergies remain at €3bn.
The approval of the deal lays to rest the ghost of GE’s failed $42bn attempt to acquire Honeywell in 2001, which was unexpectedly blocked by the commission.
Brussels’ acceptance of the GE deal also means that speculation over which deal will receive Ms Vestager’s first veto shifts to the telecoms sector.
Ms Vestager is expected to decide by October 7 whether to approve the merger of TeliaSonera and Telenor’s mobile businesses in Denmark, which is set to offer a crucial indication of whether she will look favourably on consolidation in the wider European telecommunications sector.
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