US says Alstom, not GE, must pay 700m-dollar bribery fine

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US justice department insists the French group should pay the fine and not General Electric which recently bought Alstom's power division.

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Alstom will unexpectedly have to pay the entirety of its expected 700 million-dollar settlement with the US Department of Justice to resolve foreign bribery charges against its power unit, despite previous statements that the penalty would be paid by General Electric of the US, reports The Financial Times.

When GE agreed a deal to buy the power division of Alstom for 12.35 billion euros earlier this year, both sides said the US company would assume all of its liabilities, including possible official penalties.

However, the US justice department has insisted that the French group should pay the fine instead.

Patrick Kron, Alstom’s chief executive, told an extraordinary general meeting in Paris on Friday: “We are in final negotiations with the US Department of Justice in order to reach an agreement to end the ongoing investigations.”

A settlement worth about 700 million dollars is expected to be announced in the next few days, said people close to the talks.

Mr Kron said: “To the extent that an agreement will be found, which is expected in the near future, the US Department of Justice requires that the entire fine will be paid by Alstom and no part can be transferred to General Electric.”

There will be some offset to the cost to the French company, however, with GE agreeing to pay an additional amount — not yet specified — for the use of the Alstom brand in the two companies’ planned joint venture, which will make and service steam turbines for nuclear power plants.

Both companies said the negotiations about the extra payment, which will improve the economics of the deal for Alstom, were unrelated to the issue of the justice department penalty.

Alstom had said at its first half annual results where it explained the deal: “By taking over Alstom’s Energy activities, GE undertakes to take on all assets as well as all liabilities and risks.”

Overall, Mr Kron said on Friday, the deal had become slightly less attractive for Alstom, but only by an estimated 1 to 2 per cent of its value, which would make the extra cost about 170-340 millon dollars.

He said this was “immaterial” given the size and importance of the transaction.

Alstom shareholders approved the GE deal at the extraordinary meeting on Friday, with 99.2 per cent of the votes cast being in favour of the transaction. Two-thirds of the votes were needed for the deal to proceed.

GE welcomed the vote as “an important milestone”, and said it hoped to complete the deal by mid-2015.

Following the deal, Alstom, which makes France’s TGV trains, will refocus on its smaller transport business. The energy business being sold made up nearly two-thirds of the group’s 20 billion-euro revenue in 2013.

Read more of this report from The Financial Times.

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