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Alstom investors should wait and watch: Analysts

Shareholders of Alstom T&D and Alstom India should wait for clarity on the new owner of the French parent company, analysts said.

, ET Bureau|
Updated: May 06, 2014, 03.37 AM IST
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GE has offered to buy 25% stake in Alstom T&D from public at Rs 261.25 per share in a deal valued at Rs 1,672 crore, according to the US-based conglomerate’s filing to stock exchanges.
GE has offered to buy 25% stake in Alstom T&D from public at Rs 261.25 per share in a deal valued at Rs 1,672 crore, according to the US-based conglomerate’s filing to stock exchanges.
Shareholders of Alstom T&D and Alstom India should wait for clarity on the new owner of the French parent company, analysts said after General Electric on Monday made offers to buy stakes in the two Indian subsidiaries to comply with the local rules following its $16.9 billion bid to buy the parent group’s energy arm.

GE has offered to buy 25% stake in Alstom T&D from public at Rs 261.25 per share in a deal valued at Rs 1,672 crore, according to the US-based conglomerate’s filing to stock exchanges.

The offer price represents a discount of more than 3% to the closing price of Rs 270 on the Bombay Stock Exchange on Monday. Besides, GE has offered to buy 26% share in Alstom India at Rs 382.20 per share in a deal valued at Rs 668 crore. This is a discount of more than 16% to Alstom India’s closing price of Rs 457.50.

The open offer price should not be construed as a fair price, analysts said, pointing out that GE only meant to comply with regulatory requirements. French parent Alstom holds 68.56% and 75% stakes in Alstom India and Alstom T&D, respectively.

If GE acquires the parent company, it will indirectly hold the same percentage of stakes in both the companies. Hence, according to takeover rules, it is liable to make an open offer. “The current open offer price stated by GE is just a regulatory formality and an investor should not expect any upward revision in open offer prices in the near term,” said Daljit Singh, head of research at IndiaNivesh.

GE’s entire emphasis is on completing the mega deal and the current open offer to Indian subsidiaries is just a small part of a large deal, he said, adding, “Historically, we have seen that GE does not have much listed entities. So, in the long run, there may be a possibility of revision in the open offer if the deal is sealed with GE.”

GE has made tender offer to buy shares worth up to Rs 2,340 crore in Alstom T&D and Alstom India. GE will proceed with the offers only if its bid for Alstom’s energy arm goes through, according to the statement. “It would be too early to get a sense where Indian entities are placed... We see higher growth and stock appreciation in Alstom T&D than Alstom India, given the fact that synergies are likely to accrue more in transmission and distribution (T&D) space,” said an analyst with a domestic broking firm on the condition of anonymity.

Investors could see one more open offer to comply with regulatory requirement as Siemens AG is likely to make a counter bid for the GE offer.
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