December 3, 2015 / 11:46 PM / 3 years ago

GE sees earnings benefit from Alstom deal at low end of estimate

NEW YORK (Reuters) - General Electric Co (GE.N) expects benefits from its acquisition of Alstom SA’s (ALSO.PA) power business to come in at the low end of the U.S. conglomerate’s previous estimate for 2016, the company said on Thursday, citing delays in closing the deal.

The logo of U.S. conglomerate General Electric is pictured at the company's site in Belfort, April 27, 2014. REUTERS/Vincent Kessler

GE said it expects the $10.3 billion deal to add 5 cents a share to earnings in 2016. It had earlier forecast the deal would add 5 cents to 8 cents a share.

The acquisition closed on Nov. 2, 18 months after it was announced.

GE, which is expected to give its full 2016 profit forecast later this month, is estimated by analysts to earn $1.52 per share in 2016, according to Thomson Reuters I/B/E/S.

GE also affirmed its target for the deal to add 15 cents to 20 cents a share to earnings in 2018.

In GE’s first investor call since the deal closed, the company affirmed it expects $3 billion in total cost savings by 2020, with $1.1 billion realized by 2016 and $2.5 billion by 2018. GE increased the total estimate from $1.2 billion in May.

“We see significant synergies in the combined GE and Alstom portfolio, with over 70 percent coming from our power business,” said Steve Bolze, president and chief executive of GE Power.

Savings will come from reducing duplication in manufacturing, sourcing and research and development, GE said.

The company has not publicly said whether layoffs or factory closures are expected.

GE executives also said they plan to stay competitive by servicing and repairing other companies’ equipment, using Alstom’s technology and expertise.

“We’ve received multiple approaches from customers about our plans in this space and are looking to close our first orders in the next few months,” said Paul McElhinney, president and CEO of GE Power Services.

GE said Alstom Power & Grid had slower orders as regulators reviewed the deal, but business has increased since the deal closed.

The new GE power business, integrated with Alstom, will employ 65,000 people in more than 120 countries, the company said. GE Power & Water had about 37,000 employees at the end of 2014, the spokesman said.

Reporting by Katie Reilly; Editing by Richard Chang

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