US engineering giant General Electric (GE) has entered talks to buy French company Alstom for roughly $13bn, according to reports from Bloomberg.
Should the deal go ahead it would be the most substantial move made yet by GE chief executive officer Jeffrey Immelt to reverse the massive decline in GE's share price.
The move would be significantly larger than GE's recent aquisitions, which have been between $1bn and $4bn.
"For GE, it would be the biggest acquisition in its history and makes complete sense strategic. GE is basically in every one of Alstom's businesses plus more and purchased the French company's power unit back in the 90s," said Ishaq Siddiqi, market strategist, ETX Capital.
The buy would be in line with Immelt's comments on cutting GE's reliance on volatile finance earnings. GE's present portfolio does not on the whole compete with Alstom products, with the only overlaps being in gas turbines and nuclear power. However, there would still remain significant challenges.
Espirito Santo Investment Bank, commented on the possible deal:
Whilst GE would be acquiring an extensive European footprint at reasonable multiples, we believe GE would still need to address the longer term trend in the power market where Alstom has struggled.
A deal between the two companies could be reached as early as next week, with GE taking over Alstrom's TGV trains as well as its rail-signal technology, according to people with knowledge of the talks.
However, Alstom said it "was not informed of any potential public tender offer for the shares of the company." Shares in the company shot up by almost 16 per cent in early trading following Bloomberg's report.
With a 29 per cent stake in Alstom, Bouygues has seen its share price rise by five per cent so far. Alstom shares have taken a beating over the past year, declining 20 per cent due to concerns over its cash flow.