 "In GE's deal for Alstom, French interventionism wins out")
After nearly two months of battle, both the French government and General Electric can finally declare victory.
And this being France, where argument is considered its own art form, Jeffrey R Immelt, the GE chief, said he found nothing extraordinary in protracted negotiations with the government for the right to buy the energy business of Alstom, one of the country's industrial champions. The final pieces of that $13.5-billion deal fell into place on Sunday.
''We've had a long experience in France,'' Immelt said in a phone interview over the weekend. "I think we had a pretty good sense of the context. It's very public and very interesting."
Although the government had no ownership stake in Alstom until now, Montebourg saw a symbol of French prowess being threatened by a foreign takeover. He accused Alstom of being unpatriotic by negotiating behind his back.
Then he helped push through a decree, giving President François Hollande's government the authority to block the deal on national security grounds. Not only did Alstom's energy business represent more than two-thirds of the Euro 20.3 billion, or $27.6 billion, of the company's sales last year, it was a crucial link to the country's nuclear establishment.
Montebourg even went so far as to encourage a GE rival, the German company Siemens, to make a competing bid. The pressure worked. GE eventually revised its offer in ways to suit Montebourg, finally getting the blessing of the government.
France could use some outside help energising its economy - a message that was reinforced on Monday by a report from Markit Economics, a data analysis firm, that showed the country to be a Euro zone laggard.
GE will enter into three joint ventures with Alstom that will carry the Alstom name. But the main gas-turbine business will end up as part of General Electric. The French government planned to buy 20 per cent of what remains of the stand-alone portion of Alstom, which will be a holding company for the train-manufacturing business and the joint ventures.
''The Alstom group has been maintained, with less debt, and made stronger,'' Montebourg told BFM television on Monday. If the state had not acted, he added, ''we would have an Alstom rebranded as General Electric the world over.''
Immelt said he, too, was happy with the outcome. ''It was always our expectation that we wouldn't do a deal unless it was good for GE, good for Alstom, and good for the French government,'' Immelt said. ''And I think that's what we've ended up with.''
That ending was far from certain in late April, when the government learned second-hand of GE's intentions. Patrick Kron, Alstom's chairman and chief executive, was summoned from the United States, where he had been in discussions with Immelt, to return to Paris and for a reprimand.
The timing was awkward for Hollande, who had shuffled his government less than a month earlier after his Socialist Party suffered losses in local elections. He appointed a new, supposedly more business-friendly prime minister, Manuel Valls. With unemployment high in France, and the economy barely growing, Hollande's government wanted to send a message that foreign investors were welcome.
Suddenly, a foreign offer for Alstom put that newly professed openness to the test. Alstom employs about 18,000 people in France and is a strong symbol of French technological might.
Critics in France and abroad have been quick to accuse Montebourg, an outspoken socialist, of interfering in matters better decided by the market. But government officials in Paris contend that any country facing a foreign takeover of a player in a strategic industry would have demanded a say - pointing to the role played by the interagency Committee on Foreign Investment in the United States.
In recent years that committee has challenged Shuanghui International's takeover of Smithfield Foods, which it cleared, and Huawei Technologies' acquisition of 3Leaf Technology, which it blocked.
In the end, Immelt led the campaign to reassure Hollande, making three trips to the Élysee Palace to provide reassurance and offer sweeteners. By the time Siemens, in league with Mitsubishi Heavy Industries, made its own offer last week, GE was ready to meet all of the French government's top demands.
The deal that Montebourg blessed on Friday gives General Electric the essential assets it had been seeking: Alstom's gas turbine business and its valuable customer base. But the American conglomerate agreed to create the alliance structure the government had demanded: 50-50 joint ventures with Alstom in the areas of renewable energy, steam turbines and nuclear energy, with the government having veto rights on nuclear contracts.
The arrangement gives Alstom the right to eventually sell its joint venture stake to GE at a fixed price, Kron said during a conference call on Monday, though that seems unlikely as long as the state remains a shareholder.
The American company also promised to create 1,000 mainly technical jobs in France in the next three years and it agreed to pay a penalty of Euro 50,000 for each job that it falls short of that quota.
Montebourg trumpeted the job agreement on Monday, telling BFM television: "This is the first time'' for such a clause, and that "it could be a precedent".
The Alstom that is left after completion of the deal will be a listed holding company, housing the French half of the joint ventures, as well as the rail business.
Alstom's rail business, which manufacturers the high-speed TGV trains in Europe and is a global leader locomotives and rail cars, will be strengthened by the addition of GE's rail signaling business, which provides the software and systems to control rail traffic, and a cooperative deal giving Alstom access to the United States market.
Immelt said that he was satisfied with the outcome, and that in the area of nuclear technology, in particular, ''we fully expected that the French government's interests had to be respected'' to get a deal. GE agreed to give a special state-owned company control over patents related to Alstom's advanced Arabelle nuclear steam turbines, and ceded to the government the final decision on how that technology should be licensed.
Immelt said that the alliance structure was more complex than his original proposal, but that GE had similar arrangements elsewhere in the world. ''I think we're confident that we can put up the right mechanisms and governance structures to be successful,'' he said.
He expressed confidence that GE would overcome the few remaining hurdles and formalities with the deal, which include discussions with Alstom's works councils and a regulatory review by the French and European Union antitrust authorities.
The deal is GE's largest ever, though it would rank only second if it were not for European competition regulators. In 2001, an effort by Immelt's predecessor, Jack Welch, to acquire Honeywell International for $42 billion was rejected on antitrust grounds.
Mr. Immelt played down fears that the Alstom deal would stall before the European Commission, noting, ''We've had 80 approved by Brussels since then.''
As for his talks with Mr. Montebourg, Mr. Immelt spoke with diplomatic respect: ''I think he's a good negotiator; he's a professional. He has a purpose and he has constituents, and so do I. And we both accomplished what matters for our constituencies.''
©2014 The New York Times News Service
And this being France, where argument is considered its own art form, Jeffrey R Immelt, the GE chief, said he found nothing extraordinary in protracted negotiations with the government for the right to buy the energy business of Alstom, one of the country's industrial champions. The final pieces of that $13.5-billion deal fell into place on Sunday.
''We've had a long experience in France,'' Immelt said in a phone interview over the weekend. "I think we had a pretty good sense of the context. It's very public and very interesting."
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French officials, more than in most other countries, are accustomed to intervening in corporate matters. So when Bloomberg News broke the news on April 28 that GE and Alstom were already in advanced talks, the economy minister, Arnaud Montebourg, reacted to it as if to a personal insult.
Although the government had no ownership stake in Alstom until now, Montebourg saw a symbol of French prowess being threatened by a foreign takeover. He accused Alstom of being unpatriotic by negotiating behind his back.
Then he helped push through a decree, giving President François Hollande's government the authority to block the deal on national security grounds. Not only did Alstom's energy business represent more than two-thirds of the Euro 20.3 billion, or $27.6 billion, of the company's sales last year, it was a crucial link to the country's nuclear establishment.
Montebourg even went so far as to encourage a GE rival, the German company Siemens, to make a competing bid. The pressure worked. GE eventually revised its offer in ways to suit Montebourg, finally getting the blessing of the government.
France could use some outside help energising its economy - a message that was reinforced on Monday by a report from Markit Economics, a data analysis firm, that showed the country to be a Euro zone laggard.
GE will enter into three joint ventures with Alstom that will carry the Alstom name. But the main gas-turbine business will end up as part of General Electric. The French government planned to buy 20 per cent of what remains of the stand-alone portion of Alstom, which will be a holding company for the train-manufacturing business and the joint ventures.
''The Alstom group has been maintained, with less debt, and made stronger,'' Montebourg told BFM television on Monday. If the state had not acted, he added, ''we would have an Alstom rebranded as General Electric the world over.''
Immelt said he, too, was happy with the outcome. ''It was always our expectation that we wouldn't do a deal unless it was good for GE, good for Alstom, and good for the French government,'' Immelt said. ''And I think that's what we've ended up with.''
That ending was far from certain in late April, when the government learned second-hand of GE's intentions. Patrick Kron, Alstom's chairman and chief executive, was summoned from the United States, where he had been in discussions with Immelt, to return to Paris and for a reprimand.
The timing was awkward for Hollande, who had shuffled his government less than a month earlier after his Socialist Party suffered losses in local elections. He appointed a new, supposedly more business-friendly prime minister, Manuel Valls. With unemployment high in France, and the economy barely growing, Hollande's government wanted to send a message that foreign investors were welcome.
Suddenly, a foreign offer for Alstom put that newly professed openness to the test. Alstom employs about 18,000 people in France and is a strong symbol of French technological might.
Critics in France and abroad have been quick to accuse Montebourg, an outspoken socialist, of interfering in matters better decided by the market. But government officials in Paris contend that any country facing a foreign takeover of a player in a strategic industry would have demanded a say - pointing to the role played by the interagency Committee on Foreign Investment in the United States.
In recent years that committee has challenged Shuanghui International's takeover of Smithfield Foods, which it cleared, and Huawei Technologies' acquisition of 3Leaf Technology, which it blocked.
In the end, Immelt led the campaign to reassure Hollande, making three trips to the Élysee Palace to provide reassurance and offer sweeteners. By the time Siemens, in league with Mitsubishi Heavy Industries, made its own offer last week, GE was ready to meet all of the French government's top demands.
The deal that Montebourg blessed on Friday gives General Electric the essential assets it had been seeking: Alstom's gas turbine business and its valuable customer base. But the American conglomerate agreed to create the alliance structure the government had demanded: 50-50 joint ventures with Alstom in the areas of renewable energy, steam turbines and nuclear energy, with the government having veto rights on nuclear contracts.
The arrangement gives Alstom the right to eventually sell its joint venture stake to GE at a fixed price, Kron said during a conference call on Monday, though that seems unlikely as long as the state remains a shareholder.
The American company also promised to create 1,000 mainly technical jobs in France in the next three years and it agreed to pay a penalty of Euro 50,000 for each job that it falls short of that quota.
Montebourg trumpeted the job agreement on Monday, telling BFM television: "This is the first time'' for such a clause, and that "it could be a precedent".
The Alstom that is left after completion of the deal will be a listed holding company, housing the French half of the joint ventures, as well as the rail business.
Alstom's rail business, which manufacturers the high-speed TGV trains in Europe and is a global leader locomotives and rail cars, will be strengthened by the addition of GE's rail signaling business, which provides the software and systems to control rail traffic, and a cooperative deal giving Alstom access to the United States market.
Immelt said that he was satisfied with the outcome, and that in the area of nuclear technology, in particular, ''we fully expected that the French government's interests had to be respected'' to get a deal. GE agreed to give a special state-owned company control over patents related to Alstom's advanced Arabelle nuclear steam turbines, and ceded to the government the final decision on how that technology should be licensed.
Immelt said that the alliance structure was more complex than his original proposal, but that GE had similar arrangements elsewhere in the world. ''I think we're confident that we can put up the right mechanisms and governance structures to be successful,'' he said.
He expressed confidence that GE would overcome the few remaining hurdles and formalities with the deal, which include discussions with Alstom's works councils and a regulatory review by the French and European Union antitrust authorities.
The deal is GE's largest ever, though it would rank only second if it were not for European competition regulators. In 2001, an effort by Immelt's predecessor, Jack Welch, to acquire Honeywell International for $42 billion was rejected on antitrust grounds.
Mr. Immelt played down fears that the Alstom deal would stall before the European Commission, noting, ''We've had 80 approved by Brussels since then.''
As for his talks with Mr. Montebourg, Mr. Immelt spoke with diplomatic respect: ''I think he's a good negotiator; he's a professional. He has a purpose and he has constituents, and so do I. And we both accomplished what matters for our constituencies.''
©2014 The New York Times News Service