It's been six weeks since General Electric (NYSE:GE) launched a partial takeover of French rival Alstom (NASDAQOTH:ALSMY). GE has offered to pay $13.5 billion (net of Alstom power's $3.4 billion positive cash balance) for Alstom's power generation operations, leaving the company's transportation business under French control. The deal would boost GE's industrial revenues by $20 billion a year, while filling in some missing pieces of GE's nearly complete portfolio of power generation and transport products.
GE already bought Alstom's heavy-duty gas turbine business in 2012, but the American company still wants the remaining industrial turbines. But the French government wanted more insight over the deal, and GE dutifully extended the deal deadline to allow a deeper investigation by Paris officials. In the meantime, German industry powerhouse Siemens (NASDAQOTH:SIEGY) fired off a competing Alstom bid, hand-in-hand with Japanese peer Mitsubishi Heavy Industries (NASDAQOTH:MHVYF).
Now what? Is it back to the drawing board for General Electrics' industrial-sector growth ambitions?
The two proposed deals are very, very different beasts. GE wants all of Alstom's power products. but none of its transportation assets; Siemens offers far less cash for a smaller chunk of Alstom's power turbines, but will combine rail businesses with Alstom. Mistubishi would just buy non-controlling stakes in some of Alstom's remaining power businesses.
Alstom's board of directors is reviewing the structures of the two deals, but French officials have already signaled that they prefer the German option. GE's deal may be more straightforward, but the Siemens-Mitsubishi proposal would leave more of Alstom under French control.
It's not too late for GE to come up with a modified deal structure. But the European presence of Siemens may be the final tiebreaker, even if General Electric carves up Alstom's power operations in smaller chunks, and leaves a few of them in French hands.
The GE bid is not doomed to failure at this point, but the company may want to think about a Plan B, just in case.
That would mean moving in a different direction. Hitachi 's power generation systems might seem like an obvious choice, but Hitachi plans to join fellow Japanese giant Mistubishi in the Alstom bid. Backtracking from there to a GE deal of some sort wouldn't make sense.
How about Swiss titan ABB (NYSE:ABB), then? Nope. GE is actually sort-of bidding on ABB's turbine operations already, since the company formed a joint venture with Alstom when the 2012 transaction closed. Alstom later bought out ABB's interest in this venture.
In short, the power-turbine market has already consolidated far enough to leave GE without further options if the Alstom deal falls through.
There's no guarantee that GE would go for another megadeal north of $10 billion if that happens. The company is known for its steady stream of bite-sized, plug-in acquisitions, and the Alstom offer always looked a bit unusual.
Rather than diving into speculation about GE's next potential move, let's see how the whole Alstom saga works out first. There's no reason to get excited about GE fishing for smaller fry if it can actually land the big, French shark instead. But do add GE to your Foolish watchlist so you can keep an eye on this developing story.