It’s common these days for General Electric (NYSE:GE) to find itself stuck in a precarious position. This never used to be the case until the past year or so when a mix of developments on the management side, combined with various financial impediments like poor operating performance and large, unexpected insurance reserves, led to a pattern of problems and a lack of faith in the firm’s top brass. Now, a new issue, centered around the company’s Alstom purchase dating back to 2015, has come to the front and has shareholders worried. Upon an initial look, this news appears concerning, but a deeper dive reveals that not only is this development not unexpected, it’s also unlikely to have a negative impact on the firm and its prospects moving forward.
A look back at Alstom
Back in 2014, the management team at General Electric struck a deal with Alstom to buy its Power and Grid businesses in a transaction valued in today’s dollars at $14.72 billion (12.35 billion euros). Due to the enormity of the transaction, combined with regulatory and other concerns, however, the deal eventually changed and in 2015 the company purchased the assets it wanted for $10.60 billion, inclusive of $0.60 billion in working capital. At the same time, General Electric sold to Alstom its rail signaling business for $0.80 billion.
