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French government gives itself veto rights on foreign takeovers

AFP

An employee of the French engineering group Alstom stands in front of the logo of the US company General Electric (GE) on April 29, 2014 in Belfort, FranceAn employee of the French engineering group Alstom stands in front of the logo of the US company General Electric (GE) on April 29, 2014 in Belfort, France

An employee of the French engineering group Alstom stands in front of the logo of the US company General Electric (GE) on April 29, 2014 in Belfort, FranceAn employee of the French engineering group Alstom stands in front of the logo of the US company General Electric (GE) on April 29, 2014 in Belfort, France

The French government on Thursday gave itself new powers of veto over foreign industrial takeover bids, which will allow it to control the fortunes of French giant Alstom, a current target.

The new rules, which could be applied to block the attempts of US General Electric or Germany's Siemens to take over Alstom's energy arm, were published in the official journal and will come into effect on Friday.

They will cover the key sectors of energy, transport, water, health and telecoms.

"The choice we have made, with the prime minister (Francois Hollande) is the choice of economic patriotism," Economy Minister Arnaud Montebourg told newspaper Le Monde.

"These protective measures on France's strategic interests are a renewal of our powers," he added.

Under the new rules, investments by foreign groups, whether European or not, would be submitted for authorisation to Montebourg.

The minister would then consider certain factors, including the sustainability of the proposal, the infrastructural implications, and the preservation of certain "indispensable skills" and whether the national interest is satisfied.

Permission would then be granted provided that the company meets certain commitments.

There will also be the possibility of an appeal to France's highest administrative court, for companies unhappy with the decision.

The new system will thus extend the strategic state controls already applicable to areas of national defence, such as armaments as well as information technology and gambling.

This notion of government permission is central to the French system.

It is not alone in seeking some protection for its key industries.

The Committee on Foreign Investment in the United States is a federal panel that reviews foreign investment projects in the United States as regards implications for "national security".

The situation at French industrial giant Alstom is currently at the fore of the government's industry policy.

When it emerged that talks for Alstom to sell its energy division to GE were at an advanced stage, the French government acted quickly, and with success, to encourage Siemens to outline a counter proposal.

That is an alternative strongly favoured by Montebourg, who is an outspoken defender of national patriotism towards French businesses.

The board of Alstom has said that it will decide by the end of May which of the two offers it prefers, although it has already signalled that it prefers the GE offer of 12.35 billion euros ($17.0 billion) for its energy activities.

The GE offer is the only firm proposal so far.

However France's Energy Minister Segolene Royal on Wednesday came out in favour of a takeover offer for Alstom's energy division by General Electric, in defiance of Montebourg.

She also asked the question "why do we want systematically to make foreign investment go away?"

Date created : 2014-05-15