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.

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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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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