Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
Upcoming SlideShare
What to Upload to SlideShare
Next
Download to read offline and view in fullscreen.

2

Share

Download to read offline

The M&A project of GE and Alstom

Download to read offline

Related Audiobooks

Free with a 30 day trial from Scribd

See all

The M&A project of GE and Alstom

  1. 1. THE M&A ANALYSIS OF GE AND ALSTOM FIN 5405 Mergers and Acquisitions BY Yan Meng Chuyu Sun Hao Zhang Naifan Zhang Rohit Chauhan
  2. 2. 2 Contents 1. Background............................................................................................................................................................ 3 2. Introduction of General Electric Co. .................................................................................................................... 3 3. Introduction of Alstom ......................................................................................................................................... 4 4. The motivation for the Acquirer.......................................................................................................................... 5 Industrial Logic ......................................................................................................................................................... 5 Stakeholders Logic................................................................................................................................................... 6 5. The Motivation for Alstom................................................................................................................................... 6 6. Synergies ................................................................................................................................................................ 6 Power synergy: the acquisition can expand GE’s power competitiveness. ............................................ 7 Power service synergy: broadening services capabilities .............................................................................. 7 Renewable Energy Synergy: Chain ...................................................................................................................... 7 Grid Synergy: Alstom Grid portfolio fit .............................................................................................................. 7 7. Process Pursued .................................................................................................................................................... 7 Acquisition Proposal ............................................................................................................................................... 8 “Bidding War” with Siemens ............................................................................................................................ 8 Regulatory Approval ............................................................................................................................................... 9 The completion of the transaction ....................................................................................................................10 8. Valuation..............................................................................................................................................................10 Data Mining.............................................................................................................................................................10 DCF Valuation .........................................................................................................................................................11 Other Valuation Components.............................................................................................................................11 9. Key Lessons Learned ...........................................................................................................................................12
  3. 3. 3 1. Background A news came to the public on April 24 that General Electric (GE) was in talks to acquire Alstom for $13 billion. Hearing the news, Alstom’s stocks soared immediately as much as 18 percent. On 26 April 2014, the General Electric sent the Board of Directors an offer, acquiring Alstom’s three electric department: Thermal Power, Renewable Power and Power of Grid for 13.5 billion dollars. However, one of General Electric’s competitor, Siemens, didn’t want to see the unification between GE and Alstom and proposed to Alstom an alternative deal to swap train and energy assets to beat the offer from General Electric one day later the next day. Considering that its product line was highly overlapped with Siemen’s, which led to a greater layoffs risk, as well as opposition from European regulator’s, Alstom refused Siemens’s proposal and stuck with GE. But then the question was, is 13.5 billion a fair price? 2. Introduction of General Electric Co. Thomas Edison a genius inventor and business pioneer with interest in electricity related companies: Edison Lamp Company, a lamp manufacturer in East Newark; Edison Machine Works, a manufacturer of dynamos and large electric motors in Schenectady, New York; Bergmann & Company, a manufacturer of electric lighting fixtures, sockets, and other electric lighting devices; and Edison Electric Light Company, the patent-holding company and the financial arm backed by J.P. Morgan and the Vanderbilt family for Edison's lighting experiments.1 With the help of JP Morgan and Anthony Joseph Drexel, Edison fused these 4 companies together and formed a company named Edison General Electric Company in New York on April 24, 1889. At their initial phase, the new founded company acquired Sprague Electric Railway & Motor Company. Three years later in 1892, Edison's company merged with the Thomson-Houston Electric Company and formed the company which is known to everybody nowadays, General Electric Company (GE)2 . In the same year, GE’s stock began trading on the New York Stock Exchange. In the year 1894, Edison sold all of his share and started working as a consultant to general electric while continuing collecting royalties on his patents. Charles A. coffin, who had been the leading figure at Thomas-Houston remained president of general electric until 1913. In the same year an engineer named Frank Julian Sprague gave his resignation and went on to form his own company, the Sprague electrical railways and motor. His company was later purchased by Edison. The merger of two more American based companies with Thomson-Houston made it the biggest supplier of electrical railway systems in the country. In 1918, GE, AT&T, and Westinghouse formed the Radio 1 https://en.wikipedia.org/wiki/General_Electric 2 http://www.ge.com/transformation/#energy
  4. 4. 4 Corporation of America (RCA) to develop radio technology which expanded GE’s operations into radio technology area. The year 1943 had witness another important event: General Electric Capital Corporation was established. In 1957, GE received a license from the Atomic Energy Commission to operate a nuclear power plant, and which led to the completion a lot of appliance manufacturing site, such as Appliance Park, in Louisville, Kentucky. The year 1998 holds significant value for GE, because its revenues surpassed $100 billion. From 2000 and 2001, GE suffered from a failure in acquisition: GE had announced a $45 billion deal to take over Honeywell International Inc. Which was blocked by European Commission. GE has been following a strategy of acquiring other company, for expansion of its business. And Alstom was its last target. 3. Introduction of Alstom The merger between two French companies named Thomson Houston electric-the Compagnie française pour l'exploitation des procédés Thomson Houston and Société Alsacienne de Constructions Mécaniques in the year 1928 formed a new company called Alsthom in Belfort. To expand its operation in transportation, Alsthom, after just 4 years of its operations acquired constructions Electriques de France, Tarbes, a manufacturer of electric locomotives as well as electrical and hydraulic equipment (for a complete list of acquisitions/mergers see Acquisition timeline of Alstom). In 1969 CGE (Compagnie Générale d'Electricité) a French global telecommunication equipment company with head quarters in Boulogne-Billancourt, France, emerged as the major shareholders of Alsthom. Alsthom had made several world records till 1978. In 1977 Alsthom constructed the first 1500mW generating power generator at the Paluel power station, which was meant to be a 1300mW station. And in 1978 it delivered to SNCF its first TGV, which went on to break world rail speed records in 1981 (240 mph) and in 1990 (320.2 mph). It also received an order for the largest gas turbine in the world from EDF. As the French market became insufficient, in the year 1989 to export their activities to Europe Compagnie Générale d'Electricité (CGE) and the U.K general electrical company plc (GEC) merged their power and transport activities to form GEC Alsthom. In the year 1998 the company name was changed to Alstom. This was also the year during which Alstom’s shares were listed on the Paris stock exchange. Alstom also sold a lot of its businesses, for instance in the year 2000, Alstom sold its diesel engine business to MAN group. And in the year 2003 it also sold industrial turbine business to Siemens for € 1.1 billion.
  5. 5. 5 At the beginning of 2003 came the dark era for Alstom. A sequence of poor sales threw the company into a pit of debt, around $5 billion of debt liabilities carrying a potential to force the company into liquidation. The flaws in their turbines businesses and the collapse of customer Renaissance Cruises with a downward spiral in marine market dropped the share prices of Alstom to 90%, which made the company to sell a couple of their subsidiaries (electrical transmission and distribution, diesel locomotive and Alstom power rentals). Alstom also followed the strategy of reacquiring several companies and divisions. The electric power transmission division of Areva SA which was previously sold in 2004. The company also expanded its business operations by opening new facilities in Tennessee(USA), China and Canada. In November 2013, Alstom sold some of its non- core assets in order to raise cash of approximately $1.2-$1.4 billion. Alstom operated in three main business areas: Power generation, rail transport, and transmission. In April 2014, Bloomberg broke the news that General Electric was in talks to acquire Alstom’s power and transmission business. 4. The motivation for the Acquirer Industrial Logic GE is a strong contender in gas turbines and wind onshore, whereas Alstom is a leader in Steam turbines, hydro and power of grid. The integration of Alstom Energy within GE can strengthen GE’s future development prospects. First for example in thermal energy, Alstom and GE have complementary services in steam and gas turbine technology. Alstom will bring its specific turnkey project expertise. And that expertise could bring the GE fresh thinking and new power. Secondly, in wind power, Alstom is a key player in the offshore market, GE in the onshore one, so the merger can open new markets for GE. And also, considering the fact that all three segments of Alstom have a combined sales figure of 14.8 billion Euro, and have 5200 of employees, the acquisition will surely enlarge the size of GE. Thirdly, it will diversify its geographic exposure. According to the 2014 10k report of GE, Europe is the second biggest geographic revenue source of GE. And if it acquires Alstom, it will enlarge its European activities even further, which can make the company more diversified in the operations. Fourthly, the acquisition can promote the ability of GE to fund heavy investments in new, and that can make the company financially more stable. Fifthly, it can leverage up GE’s financial strength and make GE more independent in energy field. GE is a large electricity supplier. If it controls the power generation part, then it will be more flexible and have more power of bargain. So that they can be more stable if the market price fluctuates. Sixthly, hydro field is the field where GE lags operations, whereas Alstom practices worldwide leading position. The combination of these two will introduce GE into a new market. Seventhly, in services field, Alstom's large
  6. 6. 6 portfolio matches perfectly with GE's global presence. Eighthly, in electricity transmission field, Alstom and GE are complementary both in the products and solutions they offer and their geographical presence. Stakeholders Logic For shareholders, they can expect a raise in stock price and an increase in the value whole company. Also, they can limit their risks of execution as well as the risk of operation, by diversifying their product line. For employees, they can work with diversified work forth which will enhance their understanding of the whole global market. For customers and suppliers, they can enjoy lower price of product because the company can lower the cost of production. For financial partners, they can enjoy a stronger financial standing by having the two companies together. 5. The Motivation for Alstom Alstom approved to sell its troubled thermal power energy and transmission business to GE in 2014 for €12.35bn. Out of which €700 million was used to acquire GE’s signaling activities which had around €400m of sales. This transaction resulted in 1,200 new rail employees and opening of the US signaling freight market to Alstom. The merger was a way to strengthen Alstom’s business in North America, after this transaction the French company would hold a good chunk of presence on all the continents and would make Alstom a leader in North American freight signaling by boosting its own signaling sale by 40%. It will also provide Alstom with a wider range of products and give it a better geographical coverage. Not only from the expansion point of view but also from the revenue point of view the merger was looked to be a great success for the debt induced French giant, as Alstom recorded sales of €6.2 billion and a record breaking order bookings of €10 billion in 2014/15 fiscal year. The merger was not only seen as a shield to protect the current employees interest in the company but also a vessel to create more employment for the French people as the expansion of the company’s operation required a bigger work force. The merger gave Alstom the opportunity to buy back his own share aiming to return part of the proceeds of the transaction with GE on its energy businesses to shareholders. Alstom followed the reduction mechanism, under which 91.5 million of shares which represented approximately 29.5% of Alstom’s capital was repurchased by Alstom. In addition, Alstom also received commercial support from GE, by allowing Alstom to assemble and service GE locomotives in certain parts of the world. The deal also led to joint sourcing of components and development of products and technology. With the acquisition of troubled businesses by GE, Alstom could proceed to become a stronger player in the rail business by devoting all of its focus in the rail market. 6. Synergies
  7. 7. 7 Power synergy: the acquisition can expand GE’s power competitiveness. Firstly, it is estimated that if GE acquires Alstom it can reduce $0.5 billion the manufacturing &services fee, $0.6 billion sourcing fee, $0.8 billion SG&A consolidation expense, and $0.3 engineering /technology by the year 2020 which in total would save GE Company 2.2 billion dollars. And in return, Alstom can get the money it needs for operation. Secondly, Alstom can bring vertical integration of key technologies to GE and can help GE to recapture gross margin whereas Alstom can share GE’s revenue and margin growth, and can expand BOP scope, and finally Alstom can make execution for customers simpler. Thirdly, GE can create 30+ opportunities in heat recovery and steam generators per year as well as 40+ opportunities in gas turbines generators per year. And Alstom can get low and medium voltage equipment. Fourthly, with the acquisition, GE can extend package offering with Alstom HRSGs which will add value to GE. Also, it will increase and better the total fulfillment, execution and performance of GE. For both GE and Alstom, they will have more global business partners, which will help its future operations. All in all, in power part, for GE and Alstom, they can improve product performance, lower product cost, improve the supply efficiencies, increase service margins, step into more expanded scope and can manage project risk. Power service synergy: broadening services capabilities Without Alstom, GE installed 15,000 units’ base; with Alstom, it will have 24,000 units, which will increase its bases of 60%. And Alstom’s relevant assets will accelerate GE’s total assets and increase GE’s capability, because Alstom is stronger in steam where it has a broader steam portfolio targeting steam tails. More specific, the current assets under GE’s management are around 90 billion, however, with Alstom, the target assets of GE will reach to 600 billion. And also, with the help of Alstom, GE can expand other OEM capability by using Alstom’s technology and expertise. Lastly, the acquisition will add levers to grow power services of GE. Renewable Energy Synergy: Chain With Alstom, GE can leverage wind power to Alstom’s onshore and offshore businesses. Also, the global supply chain of GE and Alstom, where both the companies possess synergies for key commodities and segments like steel, blades, casting and so on, particularly in China, where their primary focus is to bring the cost down year by year. Grid Synergy: Alstom Grid portfolio fit With the help of Alstom, GE can lower its sourcing, manufacturing and technology cost of 0.5 billion. And in SG&A, two companies have functional synergies like simplification and streamlining. Also, the two companies can expand together: strengthening the electrical balance of plant and expanding Alstom in North America. 7. Process Pursued
  8. 8. 8 Acquisition Proposal On 24 April 2014, General Electric raised a proposal to acquire Alstom’s energy business, which would be one of the GE’s largest deal in a decade, if succeeded. As soon as the news came out, Alstom’s shares closed 11% higher in Paris. GE’s shares also rose 4 cents closing at NYSE. On 30 April 2014, Alstom confirmed an offer which GE submitted to acquire the Thermal, Renewables and Grid business of Alstom for €12.35 billion, included €9.9 billion enterprise value and €2.5 billion of net cash. GE and Alstom both believed that the combination of energy business would create a more competitive entity to better service customer needs. In the energy field, GE and Alstom are complementary to each other, with several overlapping markets. Integration would generate more than $1.2 billion (€880million) in annual cost synergies by year five and bring efficiency to supply chain, service infrastructure, commercial reach and new product development.3 This acquisition would generate strong operating assets and would provide GE with a long-term growth opportunity. GE Chief Executive Jeff Immelt believed that this acquisition would help GE reduce reliance on its finance business and tilt company’s earnings more heavily toward industrial operations. The Alstom board of directors also had a positive response to GE’s offer; had an unanimously approval on 21 June 2014. “Bidding War” with Siemens While GE’s acquisition was processing in full swing, in April 2014, Alstom Chief Executive Patrick Kron received an “olive branch” from German engineering giant Siemens, showing that Siemens would like to team up with Alstom in the energy and transport field. This proposal seemed to be welcomed by French economic minister Arnaud MonteBourg, because the France government was worried that the acquisition by GE would be a threat to the France’s economic sovereignty and wanted to intervene the transaction. However, investors and analysts suspected that the greater product overlap between Alstom and Siemens would introduce greater job risk and potential issues. On 16 June 2014, Siemens together with Japanese conglomerate Mitsubishi Heavy Industries Ltd. launched a bid for Alstom for over €13.35 billion to thwart GE’s earlier €12.35 billion offer. On 19 June 2014, GE refined its bid by adding job guarantees and alliances in nuclear technology and rail. And it also sold its train-signaling business to Alstom, in an effort to support the appeal of its earlier offer. The acquisition started turning into a bidding war, as Siemens and GE upgraded their offering price to €14.6 billion on 20 June 2014. On 22 June 2014, the Alstom board of directors approved GE’s 3 “GE offers $13.5 billion enterprise value to acquire Alstom Thermal, Renewables, and Grid businesses”, April 30, 2014, Retrieved from: http://www.genewsroom.com/ge-offers-%2413.5-billion-enterprise-value-to-acquire- alstom-thermal-renewables-and-grid-businesses-97385
  9. 9. 9 offer through the company’s internal E-mail stating that GE’s offer not only met the interests of shareholders of Alstom, but also appeased French politicians demanding job guarantees and concessions on energy independence.4 Although Siemens failed in the acquisition of Alstom’s energy business and the intervention of Siemens had more impact in politics than in finance, it still was a significant improvement in the France government’s standpoint, that made GE to quickly adjust the acquisition strategy and make concessions in terms of price. On 19 December 2014, Alstom’s Shareholders Meeting authorized the sale of the Energy businesses to GE with a majority of 99.2%. Regulatory Approval The European Commission started having concerns about the transaction after GE outbid a rival offer for Alstom’s energy assets from Siemens and Mitsubishi. The takeover of Alstom, a pearl of France industry, by a US based company, drew a great attention to the European Union’s top antitrust authority. The European Commission was worried that this acquisition could limit the competition in the market for heavy- duty gas turbines and “might not only lead to higher prices but also result in less choice for customers and less innovation in the sector.”5 On 23 February 2015, the European Commission began an in-depth investigation in merging the GE & Alstom energy businesses. The U.S. Department of Justice, Antitrust Division, requested further documents. In view of the blocked deal of acquiring Honeywell, GE took a positive step in this transaction and made every effort to allay the regulators’ concern. Jeff Immelt said that GE was willing to sell off intellectual property and sell parts of business to secure the regulatory approval. Although the deadline for the EU’s investigation had been extended several times, GE kept seeking the deeper concessions and convincing regulators that their initial concerns were insignificant. On 8 September 2015, GE finally received the approval from the EU’s antitrust authority, subject to the divestiture of Alstom's large and very large gas turbine manufacturing and service business to the Italian competitor Ansaldo Energia and a job guarantee for French employees of Alstom. Regulators believed that this adjustment will build healthy competition in the European market. Meanwhile, the US 4 Alex Webb and Francois de Beaupuy, “Siemens Group Boosts Alstom Energy Offer to $19.9 Billion”, June 20, 2014 Retrieved from: http://www.bloomberg.com/news/articles/2014-06-20/siemens-mitsubishi-group-lifts- alstom-bid-as-ge-battle-heats-up 5 Tom Fairless and Ted Mann, “EU to Open Probe into GE-Alstom Deal”, Feb 23, 2015, Retrieved from: http://www.wsj.com/articles/eu-opens-probe-into-ge-alstom-deal-1424710060
  10. 10. 10 Department of Justice made an announcement on the same day, that 20 countries had approved the deal. GE now had the green light to acquire Alstom’s energy assets. The completion of the transaction On 2 November 2015, GE completed the long-running acquisition of Alstom’s power business. The final valuation was €12.4 billion, of which €9.7 billion was transferred to Alstom, leading to refocus on rail transport; the remainder was reinvested by Alstom in GE & Alstom’s joint ventures: the Grid alliance, the Renewable alliance and the scope of the Global Nuclear & French Steam alliance.6 8. Valuation The valuation of this transaction is primarily based on the DCF approach to the target company, the thermal and renewable power and grid unit of Alstom. We discount all the free cash flows to the year of 2014. Most of the data are extracted from the Bloomberg Terminal. After that some of the valuation components also have to be considered in the valuation, and these components are hardly to quantify from the limited data and resources. Data Mining The data mining for DCF valuation is challenged, because Alstom is a French Company and GE only actually acquired three segments of Alstom. Fortunately, we find some key financial data which can directly reflect the three segments of Alstom, as shown in Exhibit 3. Another important table we found is the growth rate estimation of some financial data for Alstom from 2014 to 2019, as shown in Exhibit 4. However, these data are not integrated and enough for the DCF approach. We have to find more relevant numbers to help to do the DCF valuation. Here are some key data we calculated for the valuation. § WACC: We found the WACC 2014 annual report on Bloomberg Terminal. We used this number directly because we believe this data is more convincible than we calculated according to the equation and fractional data. The 2014 annual WACC is 9% as shown in Exhibit 5. § FCF: Firstly, we predicted the Operating Income and Depreciation according to the estimated growth rate in Exhibit 4, and evaluated the capital expenditures according to the growth rate that calculate the geometric average growth in history. Secondly, there is no actual number of incremental working capital for thermal and renewable power and grid unit, so we estimated it in another way. In Exhibit 3, there is an item called capital employed, which is the sum of working capital and fixed asset. By 6 “Management Report on Consolidated Financial Statements Fiscal Year 2014/15”, Retrieved from: http://www.alstom.com/Global/Group/Resources/Documents/Investors%20document/Financial%20results/2014 -15/MDA_FY_14-15_VA.pdf?epslanguage=en-GB
  11. 11. 11 subtracting the fixed asset, we estimated the working capital and then forecasted the incremental working capital. Thirdly, we figured out the corporate tax rate in France is 33.3%7 . Finally, we forecasted the future cash flows and discounted the FCFs for the three segments, as shown in Exhibit 6. § Terminal Value: For the future growth rate, we calculated the average growth rate of EBIT in the following years excluding the outlier value. The estimated growth rate is 2.0498%. Then we calculated the terminal value of each segment in terms of the equation, 𝑇𝑒𝑟𝑚𝑖𝑛𝑎𝑙 𝑉𝑎𝑙𝑢𝑒 = 𝐶𝐹/×(1 + 𝑔)/(𝐾8 − 𝑔) § Long-term Debt: Because of the limited data, we don’t have the exact long-term debt for thermal and renewable power and grid unit. We could find the long-term debt for the whole Alstom group in its balance sheet, so we assumed that the proportion of long-term debt is the same in these three segment as in the whole Alstom, as shown in Exhibit 7. DCF Valuation After the complex data mining, we finally figured out the DCF approach valuation, which is the difference between the total DCF and the total long-term debt of Thermal and Renewable Power and Grid Unit. The value is €11,435.77 million, as shown in Exhibit 8. It is less than the historical transaction price €12,350.00 million, probably because some other valuation components may create the premium of this payment. In terms of our valuation, this premium is about €914 million. Other Valuation Components Some valuation components could explain why a buyer may pay a premium over the present market value. These components include: § Cost savings: As mentioned in the Synergies part, about 2.2 billion dollars cost saving will be brought to GE by the year 2020. If we assume that these savings will be effective evenly in the years from 2015 to 2020, the discounted savings in the year of 2014 is €1644.83 million. § Competitor: As mentioned in the Process Pursued part, Siemens and Mitsubishi once made an €14.6 billion offer, which was about €2250 million more than the GE’s one. This bidding brought huge pressure to lift the price. We absolutely couldn’t simply add the discounted cost savings and competitor’s price together as the other valuation premium. It is very hard to quantify how much premium brought by cost savings and competitor. We still believe that the price of €12,350.00 million is slightly low, even if half of the premium valuation would influence the final transaction valuation. If half of the premium valuation is added, the final valuation would be approximately €13,340.00 million, which is €1 billion higher than the historical price. Therefore, at least, this is a small financial benefit for GE. 7 France Corporate Tax Rate, 1981 – 2016, “Trading Economics”; available from: http://www.tradingeconomics.com/france/corporate-tax-rate
  12. 12. 12 9. Key Lessons Learned • The initial lesson we learned is, in every transaction, there are several beneficiaries. If a company wants to make the merger or transactions successful, it has to satisfy every beneficiary. In this specific case for example, GE gained the most out of this transaction by complying not only with the needs of Alstom but also with the conditions and interests of the French government and employees. To get the French government off their back, GE agreed to introduce more employment opportunities in France including the fulfillment of some other basic terms. Current employees on the other hand gained as GE assured them that it will follow a policy of no lay-offs and better career prospects. Even the competitors like Siemens and Ansaldo received their fair share from this transaction as the former attained fame through participating in this bidding war and the latter benefited by owning the gas turbine business of Alstom at a fair price. This acquisition also turned out to be advantageous for the acquire as Alstom by getting rid of its troubled businesses can now direct its focus on rail transport. • The estimated value of the company gets affected by several factors. The future cash flow will be affected by the estimation of the future growth rate, capital expenditure, incremental working capital, non-cash expense and so on. Also, other factors that will affect the value of the company are cost saving from synergy and the competition from all the rivals. • The abundance of overlapping businesses can sometimes affect the transaction negatively. As we noticed in our readings that the major deal breaking factor between Alstom and Siemens was the unnecessary overlapping in their several businesses. • In global mergers, there are numerous formalities to be fulfilled which can cause the transaction to drag for several months. As in this particular merger the investigation lasted for an irrelevantly long period, due to which the deadline has to be extended more than once. • Financial synergies allow companies to lower cost of capital and leverage on the combined financial statement for better financing structure. As GE estimated that after the merger it can save the company a total of $2.2 billion dollars in costs. • Diversification and globalization are considered as key factors when a company wants to become financially stronger, and minimize the impact of global shocks. For instance, we observed that approximately 17% of GE’s revenue comes from Europe so acquiring Alstom would further strengthen the hold in Europe which will benefit GE in case of market crash. • Competitive advantage is also a major factor in mergers as the combined company can handle the intense market competition better with assess to more resources and increased market share.
  13. 13. 13 Appendix Exhibit 1 Acquisition Timeline of General Electric Co.
  14. 14. 14 Exhibit 2 Acquisition Timeline of Alstom
  15. 15. 15 Exhibit 3 Historical Financial Data of Target Company from Bloomberg, 2007 – 2014 (€ 000s) ALSTOM SA (ALO FP) - BY SEGMENT IN MILLIONS OF EUR EXCEPT PER SHARE FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 THERMAL POWER ASSETS 9745.00 11888.00 13640.00 13953.00 11451.00 11570.00 10835.00 9610.00 LIABILITIES 8287.00 10601.00 12171.00 11749.00 9184.00 9500.00 8571.00 7145.00 CAPITAL EMPLOYED 1458.00 1287.00 1469.00 2204.00 2267.00 2070.00 2264.00 2465.00 REVENUE 8871.00 11370.00 13054.00 13901.00 9725.00 8726.00 9179.00 OPERATING INCOME 711.00 1007.00 1248.00 1468.00 879.00 850.00 959.00 DEPRECIATION AND AMORTIZATION 177.00 199.00 226.00 224.00 228.00 223.00 225.00 CAPITAL EXPENDITURES -189.00 -296.00 -407.00 -428.00 -335.00 -264.00 -238.00 GRID ASSETS — — — — 5891.00 5197.00 5462.00 5072.00 LIABILITIES — — — — 3809.00 3058.00 3280.00 2972.00 CAPITAL EMPLOYED — — — — 2082.00 2139.00 2182.00 2100.00 REVENUE — — — — 3653.00 4013.00 3829.00 OPERATING INCOME — — — — 218.00 248.00 238.00 DEPRECIATION AND AMORTIZATION — — — — 229.00 209.00 134.00 CAPITAL EXPENDITURES — — — — -126.00 -140.00 -113.00 RENEWABLE POWER ASSETS — — — — 2191.00 2674.00 3106.00 3104.00 LIABILITIES — — — — 1387.00 1630.00 1906.00 1641.00 CAPITAL EMPLOYED — — — — 804.00 1044.00 1200.00 1463.00 REVENUE — — — — 1941.00 2027.00 1803.00 OPERATING INCOME — — — — 173.00 150.00 88.00 DEPRECIATION AND AMORTIZATION — — — — 34.00 45.00 34.00 CAPITAL EXPENDITURES — — — — -76.00 -179.00 -166.00
  16. 16. 16 Exhibit 4 Future Growth Rate Prediction from Bloomberg, 2014 – 2019 (€ 000s) ALO FP EQUITY CURRENCY IN MILLIONS OF EUR FY 2014 Est FY 2015 Est FY 2016 Est FY 2017 Est FY 2018 Est FY 2019 Est Average Growth 12 MONTHS ENDING 03/31/14 03/31/15 03/31/16 03/31/17 03/31/18 03/31/19 REVENUE -1.5141% -68.9306% 8.9445% 6.3118% 4.9825% 4.0001% GROSS MARGIN % 2.6306% 66.6583% - -0.3425% 0.0000% 5.7650% OPERATING PROFIT 14.9576% 62.2222% 0.0000% 0.0000% 10.1874% 4.7210% EBIT -19.9675% -70.2669% -39.4340% 3.4836% 11.9252% 12.7580% 2.0498% EBITDA -15.0050% -73.3799% -21.1608% 8.4004% 7.5021% PRE-TAX PROFIT -4.8755% -84.9039% 216.1695% 31.4873% 8.7172% NET INCOME ADJ+ -17.2608% -65.9811% 0.0000% 0.0000% 24.8687% 8.9450% NET INCOME, GAAP -13.2170% -55.5423% 0.0000% -92.2454% 38.3340% 16.3543% NET DEBT 22.0843% 10.0510% -93.4629% -37.0800% 1.2171% 0.0000% RETURN ON EQUITY % -17.3793% -67.5193% 0.0000% -90.9981% 16.7713% 18.5939% RETURN ON ASSETS % -14.7209% -83.5840% 0.0000% -86.0262% 40.9683% 14.5310% DEPRECIATION 29.3333% -33.3333% -11.3793% -32.5263% 6.7863% 2.2644% FREE CASH FLOW 0.0000% - 293.1404% 72.5693% 98.7925% 0.0000% 216.3981% CAPEX -9.3989% -44.8073% -80.7044% -55.8560% -5.4650% -21.4119% Exhibit 5 Cost of Capital of Alstom 2014 A WEIGHT COST WEIGHT*COST EQUITY 51.80% 15.00% 7.80% DEBT COST (A-T) 48.20% 2.50% 1.20% PREFERRED EQUITY 0.00% 0.00% 0.00% WACC 9.00%
  17. 17. 17 Exhibit 6 Cash Flow Forecasts, 2014 – 2019 (€ 000s) ALSTOM SA (ALO FP) - BY SEGMENT IN MILLIONS OF EUR EXCEPT PER SHARE FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Terminal Value Growth rate 12 MONTHS ENDING 03/31/14 03/31/15 03/31/16 03/31/17 03/31/18 03/31/19 THERMAL POWER — — — — OPERATING INCOME 1102.44 1788.41 1788.41 1788.41 1970.60 2063.63 DEPRECIATION AND AMORTIZATION 291 194 171.92 116.00 123.88 126.68 CAPITAL EXPENDITURES -247.32 -257.01 -267.08 -277.54 -288.41 -299.70 OI GROWTH RATE 0.15 0.62 0.00 0.00 0.10 0.05 1.05 DEP. GROWTH RATE 0.29 -0.33 -0.11 -0.33 0.07 0.02 1.04 CAPITAL EXPENDITURES GROWTH RATE 1.04 WORKING CAPITAL 1504 1768.70 1.18 INCREMENTAL WORKING CAPTIAL 264.70 FCF 865.16 833.01 766.63 885.16 938.72 13783.22 DCF 793.72 701.13 591.98 627.07 610.10 8958.15 GRID OPERATING INCOME 273.60 443.84 443.84 443.84 489.05 512.14 DEPRECIATION AND AMORTIZATION 173.31 115.54 102.39 69.09 73.77 75.45 CAPITAL EXPENDITURES -107.01 -101.34 -95.97 -90.89 -86.07 -81.51 OI GROWTH RATE — — — — — — 1.04 DEP. GROWTH RATE — — — — — — 0.76 CAPITAL EXPENDITURES GROWTH RATE — — — — — — 0.95 WORKING CAPITAL 1592.80 1627.56 — — — — 1.02 INCREMENTAL WORKING CAPTIAL 34.76 — — — — — FCF 275.47 267.70 239.48 279.14 300.77 4416.25 DCF 252.73 225.31 184.92 197.75 195.48 2870.26 RENEWABLE POWER OPERATING INCOME 101.16 164.11 164.11 164.11 180.83 189.36 DEPRECIATION AND AMORTIZATION 43.97 29.32 25.98 17.53 18.72 19.14
  18. 18. 18 Exhibit 6 (continued) ALSTOM SA (ALO FP) - BY SEGMENT IN MILLIONS OF EUR EXCEPT PER SHARE FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Terminal Value Growth rate 12 MONTHS ENDING 03/31/14 03/31/15 03/31/16 03/31/17 03/31/18 03/31/19 CAPITAL EXPENDITURES -140.33 -161.78 -156.04 -152.72 -156.84 -155.20 OI GROWTH RATE — — — — — — 0.71 DEP. GROWTH RATE — — — — — — 1.00 CAPITAL EXPENDITURES GROWTH RATE — — — — — — 1.48 WORKING CAPITAL 1152.60 — — — — — 1.25 INCREMENTAL WORKING CAPTIAL 189.23 — — — — — FCF -212.24 -209.83 -214.96 -206.75 -198.98 -2921.69 DCF -194.71 -176.61 -165.99 -146.46 -129.33 -1898.90 Exhibit 7 Long-term Debt, 2014 (€ 000s) LONG-TERM DEBT LIABILITIES ALSTOM SA(ALO FP) 4407.00 25144.00 THERMAL POWER 1252.31 7145.00 GRID 520.90 2972.00 RENEWABLE POWER 287.62 1641.00 TOTAL SEGMENTS 2060.83 Exhibit 8 DCF Valuation (€ 000s) VALUE TOTAL DCF 13496.6036 LT DEBT 2060.82986 DCF VALUATION 11435.77374
  • MuraleedharanJagadeesan

    Mar. 17, 2018
  • PeniAsihRahadjengSE

    Nov. 2, 2017

Views

Total views

1,729

On Slideshare

0

From embeds

0

Number of embeds

2

Actions

Downloads

53

Shares

0

Comments

0

Likes

2

×