Alstom SA (ALO), the French company selling most of its energy-equipment businesses to General Electric Co. (GE) to focus on trainmaking, may return as much as 4 billion euros ($5 billion) to shareholders following the deal.
Alstom’s board proposes that the company keeps two-thirds of the 12.35 billion euros coming from GE transaction to cut debt and strengthen its balance sheet, it said in a statement last night. The remainder could be distributed to shareholders via a share buyback. The stock gained as much a 4.2 percent in Paris trading today.
The French manufacturer, based in the Paris suburb of Levallois-Perret, agreed to sell most of its energy division to GE in June amid slowing demand for power plants in Europe and rising competition from Asian manufacturers. Alstom also plans to use the proceeds to expand its rail division and create energy ventures with GE.
“The board wishes to ensure a solid financial structure for the group in order to address future operational needs and support its development,” Alstom said yesterday.
Shareholders will vote on the deal at a meeting on Dec. 19. The French company has already signed the final agreements with Fairfield, Connecticut-based GE after completing consultations with works councils, which represent employees.
The company expects to complete the disposal in the second quarter of next year, and will thereafter maintain a “cautious” dividend policy, Chief Executive Officer Patrick Kron said this month. Alstom will look at acquisitions in areas such as signaling and maintenance “in an opportunistic manner,” though “there is nothing cooking,” he said.
Alstom shares were up 4 percent as of 9:04 a.m. in Paris. Before today, the stock had gained 6.5 percent this year, valuing the manufacturer at 8.7 billion euros.
The French company earlier this month predicted rising revenue after fiscal first-half orders doubled to a record. New orders in the six months ended Sept. 30 surged to 6.4 billion euros from 2.74 billion euros a year earlier, helped by a 4 billion-euro railway contract in South Africa.