GE (NYSE: GE) and Hitachi, Ltd. (NYSE: HIT) (TSE: 6501) have signed a letter of intent to negotiate the formation of a global alliance that will combine their new nuclear power plant and services businesses with the goal of strengthening their existing operations, accelerating the development of new products and services, and positioning their alliance for growth in the nuclear energy industry.
The transaction will proceed through a cross-shareholding arrangement under which Hitachi will take a 40% holding in GE?s existing nuclear business and GE will take approximately 20% holding in Hitachi?s existing nuclear business. The parties anticipate that the transaction will be completed in the first half of 2007, subject to all required approvals and negotiation of the definitive agreement.
Within the new alliance GE and Hitachi will execute a single strategic vision that will create a broader portfolio of industry solutions, an improved capacity for new build opportunities, and the assets to invest and grow the business. GE and Hitachi believe that this will enable improved customer service and support.
?This is truly a historic moment for our two companies,? said GE Energy President and CEO John Krenicki. ?Each business is contributing its existing nuclear power plant technology and service resources and assets to create a new alliance that will be the most comprehensive BWR technology and service provider in the world.?
The move will strengthen GE and Hitachi?s existing boiling water reactor (BWR) capabilities in the light water reactor industry, while positioning the alliance for expansion into new nuclear energy segments and technologies. Potential areas of investment include new infrastructure, advanced reactor design, and service technology, with a focus on new spaces across the industry value chain.
With new reactor fleets being built or planned around the world, the transaction will bring together the type of experience, capacity and capability that is vital to the delivery of new nuclear power plants on time, within budget and at the highest quality levels.
?By taking this bold step together, GE and Hitachi are ensuring that both companies will be strongly positioned to compete effectively and grow in a sector worth billions of dollars,? Krenicki said.
?Hitachi and GE are recognized world leaders in innovation,? said Hitachi Power Systems CEO, Akira Maru. ?Hitachi believes that close liaison with GE is essential for expanding the BWR business both in Japan and globally. Based on this thinking, Hitachi has embraced a business strategy that emphasizes cooperation with GE. This alliance will forge a new model of industrial excellence that complements our respective strengths in the nuclear industry.?
By combining their resources, the new alliance will create an attractive platform for growth and also signal the beginning of a new era for both companies as they continue to position themselves to compete in what many in the nuclear industry are calling a ?global renaissance for nuclear energy.?
?This nuclear alliance further underscores GE?s commitment to the industry and to doing what is necessary to make us stronger for the next generation of nuclear energy,? said Andy White, president and CEO of GE?s nuclear business, which is based in Wilmington, N.C.
GE?s nuclear business, which is part of GE Energy, recently marked its 50th anniversary in the nuclear industry. It develops advanced light water reactors and provides a wide array of technology-based products and services to help owners of both boiling and pressurized water reactors safely operate their facilities with greater efficiency and output.