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GE Poised to Tap $57 Billion Overseas Cash in Alstom Deal

By Jonathan Browning
April 23, 2014 10:32 PM EDT 78 Comments
Logos of CJSC Transmashholding, a Russian locomotive and rail equipment manufacturer, and Alstom SA, during the III International Rail Salon Expo 1520 in Moscow.
Photographer: Andrey Rudakov/Bloomberg
Logos of CJSC Transmashholding, a Russian locomotive and rail equipment manufacturer, and Alstom SA, during the III International Rail Salon Expo 1520 in Moscow.

General Electric Co. can dip into the $57 billion of cash it has amassed overseas to buy France’s Alstom SA in its biggest acquisition ever, a person with knowledge of the matter said.

GE is in discussions to pay more than $13 billion for the French builder of trains and power plants, people with knowledge of the matter said yesterday. Chief Executive Officer Jeffrey Immelt will be able to tap GE’s foreign cash reserves to finance the purchase, according to one of the people.

GE joins Pfizer Inc., which has held informal talks to acquire AstraZeneca Plc, in seeking to take advantage of money from profits stashed overseas instead of bringing it back to the U.S., where it would be taxed at a higher rate. Multinational companies have accumulated $1.95 trillion outside the U.S., up 11.8 percent from a year earlier, according to a Bloomberg News review of filings.

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“When you have tax due on repatriated cash and you know you’re still in growth mode in a particular market, it makes sense to use the cash,” said Bob Partridge, a managing partner for transaction advisory services at Ernst & Young LLP in Hong Kong. “Multinationals are looking at both organic and inorganic opportunities.”

The Alstom deal would bring overseas acquisitions by U.S. companies in 2014 to more than $75 billion, slightly ahead of last year’s pace, data compiled by Bloomberg show. In the year-earlier period, U.S. companies made $73 billion of deals abroad, the data show.

Effective Cost

An agreement between Fairfield, Connecticut-based GE and Alstom, the builder of high-speed TGV trains, may be announced next week, the people said. Almost two-thirds of GE’s $89 billion cash pile at the end of 2013 was outside the U.S.

U.S. companies are keeping cash offshore to avoid paying up to a 35 percent tax rate on profits they earn around the world. They only pay taxes when the cash is repatriated. By spending money overseas, the effective cost of a purchase can also be lowered, making acquisitions easier.

Pfizer, the world’s largest drugmaker, held informal, now-discontinued talks with AstraZeneca about buying the London-based maker of asthma and heart drugs, two people familiar with the matter said April 21. Pfizer had $69 billion in untaxed cash overseas as of last month, according to data compiled by Bloomberg.

AstraZeneca has a market value of 51 billion pounds ($86 billion).

To contact the reporter on this story: Jonathan Browning in Hong Kong at jbrowning9@bloomberg.net

To contact the editors responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net Darren Boey

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