Was $57 Billion in Cash Burning a Hole in General Electric Company's Pocket?

GE is tapping into a war chest of cash to acquire Alstom. Is this the best move for shareholders?

Jun 23, 2014 at 6:15PM

Hq Upstatenyer Large

Former GE headquarters building. Source: Wikipedia/UpstateNYer.

Back in April, General Electric (NYSE:GE) established a budget for potential acquisitions in the year ahead. The ideal price tag, as laid out by GE's CEO Jeff Immelt, was anywhere between $1 billion and $4 billion. But Immelt also noted that the company would be "opportunistic" if a larger acquisition happened to present itself, and sure enough -- only a few days later -- it did. 

In the months that followed, GE entered into a quasi-bidding war over Alstom, which is an industrial outfit that, for all intents and purposes, is the "General Electric of France." GE wanted to acquire Alstom's power and grid business, in particular, and was willing to pay upwards of $16.9 billion to do so, a price well beyond its predetermined range.

Accordingly, shareholders and analysts have scrutinized the deal since the day it first made headlines, wondering whether GE's massive $57 billion foreign cash balance was burning a hole in its pockets and thereby tempted Immelt to go shopping in Paris. Is their evidence, in fact, that GE stretched outside of its comfort zone to deliver its largest deal ever?

In the following video, Motley Fool senior manufacturing specialist Isaac Pino dissects the ins and outs of the Alstom transaction and sheds some light on whether this was the best move for GE. Perhaps more important, was it the best long-term move for GE's shareholders? Click on the video below for insight into GE's decision and the possible alternatives that could have unfolded.

Are you clamoring for dividends?
The smartest investors know that dividend stocks like GE simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Isaac Pino, CPA, owns shares of General Electric Company. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers