Alstom accepts €10 billion GE bid for its energy unit
GE is not in exclusive talks with Alstom, says sources; Alstom is also set to receive an offer from Siemens
Alstom
is expected to make a statement about the two offers early on
Wednesday, before its shares, suspended since late last week, resume
trading. Photo: Bloomberg
Paris/Frankfurt: The board of Alstom SA accepted General Electric Co’s (GE) €10 billion ($13.82 billion) bid for its energy unit on Tuesday, several sources familiar with the situation told Reuters.
Sources said GE is not in exclusive talks with Alstom. The French
transport-to-turbines group is also set to receive an offer from its
much larger German competitor Siemens AG , which said it had sent a letter to Alstom after its managing and supervisory boards had decided to make an offer.
Alstom is expected to make a statement about the two
offers early on Wednesday, before its shares, suspended since late last
week, resume trading.
The rival bids have triggered a fierce national debate
about the fate of power turbine and train manufacturing in France—both
integral to the country’s engineering pedigree. The French government
has said it favours the Siemens offer, which via an asset swap would
create two European sector champions: Siemens in electricity and Alstom
in trains.
“Alstom’s board has accepted the GE offer, it will be examined by an independent committee,” one source close to the talks told Reuters.
“The two groups will not enter into exclusive
negotiations. This means Alstom cannot go and look for other offers, but
there is nothing to stop it from examining offers it receives without
soliciting them,” the source added.
Earlier on Tuesday, Germany’s Siemens said it would make
an offer to Alstom if given four weeks to examine its books and draw up a
detailed plan to rival a move by GE.
“The prerequisite is that Alstom agrees to give Siemens
access to the company’s data room and permission to interview the
management during a period of four weeks, to enable Siemens to carry out
a suitable due diligence,” Siemens said.
It gave no further details of its plans, but at the
weekend Siemens approached Alstom with a proposal to exchange part of
its train business plus cash for Alstom’s power arm. In a short letter,
it had outlined its proposal worth $14.5 billion.
French concerns
In a letter to French president Francois Hollande, published by financial daily Les Echos and authenticated by GE, GE chief executive Jeffrey Immelt responded to several of the French government’s key concerns about the US-based firm’s offer.
Immelt said that if GE were to buy Alstom’s energy unit,
it would boost employment in France and locate global headquarters for
several key businesses in the country, including for grids, hydro power,
offshore wind and steam turbines.
GE would also work with the French government, utility
EDF and nuclear group Areva to protect France’s strategic nuclear sector
and its exports and would be willing to sell Alstom’s wind turbine
activities to French investors.
GE also offered France a representative for its board,
and offered to look into the possibility of a transportation
joint-venture with the remaining transport activities of Alstom, which
are widely considered to be too small to survive independently.
Defensive move
France’s Socialist government has declared that it must
have a say in the outcome of the bidding war, as thousands of jobs are
at stake and state-owned utility EDF and the national railways are major
clients of Alstom.
“There aren’t only financial interests at stake in this
matter; there are also industrial, social and human interests,” economy
minister Arnaud Montebourg said after a meeting with unions. “The government does indeed intend to defend our country’s interests.”
Alstom CEO Patrick Kron informed Montebourg of GE’s interest last week.
Just over a week before Siemens boss Joe Kaeser presents
his future vision for the Munich-based conglomerate, investors in
Siemens were sceptical about a potential deal.
“We would have preferred a less risky strategy of organic growth,” said Tim Albrecht, fund manager at DWS Investment.
A fund manager who declined to be named said: “Until last
week, Alstom was seen as dead, and its products were not thought to be
competitive.”
He said a purchase would be a 180-degree turn and Siemens would need very good arguments to justify it strategically.
Some investors may also be wary of a French-German deal,
given problems with previous cross-border tie-ups, such as defence and
aerospace company EADS and drugmaker Aventis, which have both been
plagued by battles for control.
Many analysts and investors said they believed the Siemens move was primarily defensive.
Rob Virdee, analyst at Espirito Santo Investment Bank, said the offer looked like a move to stop GE’s expansion in Europe.
Industry veterans say Alstom and Siemens have very
different corporate cultures, and have competed aggressively against one
another for decades.
An industry insider told Reuters that no one at
Alstom wants a deal with Siemens because everyone, from the low-level
worker to Kron, recalls how Siemens lobbied aggressively against state
aid for Alstom when it almost went belly-up in 2004.
Siemens shares closed up 0.6 percent compared with a 1.5% rise in shares on the blue-chip DAX index. Reuters
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