The French government on Sunday sought to put the brakes on General Electric's bid for Alstom, one of the largest industrial companies in France, warning that national interest was in play and that the French state, not the companies, would decide the outcome.
"GE and Alstom have their calendar, which is that of their shareholders," the economy minister, Arnaud Montebourg said, "but the French government has its own, which is that of economic sovereignty."
GE is seeking to buy Alstom's energy business, and Montebourg had been scheduled to meet on Sunday with Jeffrey Immelt, chief executive of the American conglomerate. But the meeting was postponed for later in the week after the French government welcomed the outlines of an offer by Siemens, the German industrial giant that is Alstom's rival.
Siemens has made known a proposition "to create two European champions in the areas of energy and transport," Montebourg said in his statement, "one centred around Siemens, the other around Alstom".
Earlier on Sunday, Siemens released a statement saying it had "submitted a letter to the board of Alstom to signal its willingness to discuss future strategic opportunities".
Alstom's board had been expected to meet to discuss the General Electric (GE) offer, but it was not clear if that was still on the table Sunday afternoon. Alstom and GE declined to comment.
The French government was caught off guard late Wednesday by a Bloomberg News report that said GE was preparing an offer of about $13 billion for Alstom. In fact, GE is interested only in Alstom's power and power transmission businesses, which account for about 70 per cent of the French company's annual sales, according to a person close to the negotiations who was not authorised to speak publicly.
Under the GE proposal, the American company would combine Alstom's energy assets, including businesses that make turbines for generating electricity with natural gas, wind, oil and nuclear power, as well as the components of the grid over which the electricity is delivered. But Alstom would retain its transportation business, which makes the Train à Grande Vitesse, or TGV train, plus subway systems and rail infrastructure.
Alstom had said late last year that it was considering spinning off the rail unit to raise cash. Alstom was bailed out by the state in 2004, receiving euro 2.2 billion, or $3 billion, in aid from the then-finance minister Nicolas Sarkozy. The company has been weakened by flagging demand in Europe and rising competition in Asia and elsewhere. Its profit has fallen to the point that it is struggling to invest in the next generation of research and development needed to remain competitive.
Another person briefed on the matter noted that while GE has been doing due diligence on Alstom's power and grid businesses for some time, Siemens may only now have begun to carry out its own analysis, to meet with Alstom management or to start looking at the books.
Montebourg's desire to block GE's offer until Siemens has caught up could mean any deal remains months away. And that is before any potential antitrust concerns come into play. The European Commission, the union's executive arm, is likely to carefully scrutinise any merger of the two European companies, as parts of their energy businesses overlap directly. That may explain Montebourg's description of "two European champions".
While France remains one of the world's top investment destinations for multinational companies, the government makes no apologies for its industrial policy, which seeks to nurture and defend its national "champions". It has at times made clear that foreigners were unwelcome, as it did in 2005 amid Pepsico's purported interest in Danone, the yoghurt maker, and more recently last year, when Montebourg torpedoed Yahoo's acquisition of the video site DailyMotion.
GE is no stranger to France, and indeed Montebourg noted that GE and Siemens were both part of "our national industrial tissue". GE employs about 10,000 people in France, including at an airplane engine manufacturing joint venture with Safran, which makes the commercially successful CFM 56-3 jet engine.
The news of GE's interest sent Alstom's shares nearly 11 per cent higher on the Paris bourse on Thursday; trading in the shares was suspended on Friday at the market regulator's request, pending a statement from Alstom.
The government will take "the time necessary to carry out a serious examination of the two proposals," Montebourg added, reminding the companies that Alstom's sales were heavily dependent on public demand and government-supported exports. He also called on Alstom and its stakeholders to "examine all of the offers on the table".
"Considering the strategic issues in play for France's industry and economy," Montebourg said, "the government will not accept that a decision is made in haste and without a joint assessment of the interests of the nation in the two alternatives."
©2014 The New York Times News Service
