The board of the French engineering group Alstom unanimously accepted General Electric’s offer to buy its energy division, Alstom said on Saturday, a day after the French Government backed the US conglomerate’s bid.
But French President Francois Hollande said Saturday that the final stance of his Government on the sale depends on a deal between Paris and Alstom shareholder Bouygues.
A requirement that Paris gave Friday in backing GE’s bid over a joint offer from Germany’s Siemens and Japan’s Mitsubishi Heavy Industries was that the French government acquire a 20—per—cent stake in the spinoff, which would make it the biggest shareholder. It intends to buy that stake from Bouygues.
The Government and Bouygues are now negotiating the price of those Alstom shares, Hollande said.
Paris wants to buy two-thirds of Bouygues’ shares in the French engineering group. Economy Minister Arnaud Montebourg said France was willing to pay only market price for the stock, which closed Friday at €28 ($38). At that valuation, France would pay €1.7 billion for the 20 per cent stake.
Bouygues reportedly is demanding €35 per share, which would put the price of the deal at €2.1 billion.
Montebourg said GE must accept France’s demand for the 20 per cent stake, or the Government would block the company’s offer.
GE chairman and chief executive Jeffrey Immelt said Saturday that the company was moving “to the next phase of the Alstom alliance.” “We look forward to working with the Alstom team to make a globally competitive power and grid enterprise. We also look forward to working with the French Government, employees and shareholders of Alstom,” Immelt said. “As we have said, this is good for France, GE and Alstom.
“For GE, the overall economics of the deal remain intact. This transaction remains accretive in year one.” Hollande said that if a deal with Bouygues could not be struck, “it would be necessary to reconsider the alliance as it has just been announced.” GE offered €12.35 billion for Alstom energy while taking pains to ease French concerns about the possibility that jobs and engineering expertise would leave France.
Montebourg said the US conglomerate and Alstom would create a 50-50 alliance in nuclear and steam, renewable energy and grids. All three businesses would be headquartered in France, he said.
Like GE, Mitsubishi Heavy Industries had offered to create a joint venture with Alstom in the same three areas. Siemens’ interest was in Alstom’s gas turbine factories.
Their joint offer had valued Alstom’s energy activities at €14.6 billion.
Montebourg called the Mitsubishi-Siemens offer “very credible” but said it had run up against EU competition rules.
Siemens expressed “understanding for the national interests of the French Government on the realignment of Alstom.” Mitsubishi Heavy Industries said it regretted losing out to GE in the deal but still wished to strengthen ties with France and French industrial partners in the future.