The French government has rejected a joint bid from Germany's Siemens and Japan's Mitsubishi for a stake in French energy and transport giant Alstom, despite the offer surpassing a previous offer from GE by almost €2 billion.
Ahead of a June 23 deadline on a binding offer from GE, Germany’s Siemens presented France with a joint proposal with Japan’s Mitsubishi Heavy Industries (MHI) that valued Alstom’s energy arm at €14.2 billion ($19.3 billion), besting GE’s earlier offer of €12.4 billion.
But President François Hollande’s government responded swiftly by saying it wanted better offers from both bidders.
“The talks between the state and the different companies are going to continue this week,” a source in Hollande’s office said after a meeting with CEOs Joe Kaeser of Siemens and Shunichi Miyanaga of MHI to hear the joint proposal.
“The offers must be improved,” the source said.
A source close to GE told Reuters Wednesday that the company was preparing to present an improved offer to the French government and unions at a meeting on Thursday.
“GE is seeing the government and the Alstom unions tomorrow,” the source said. “The offer will, of course, be improved.”
But Siemens' Kaeser said he saw no reason to raise a bid that had already surpassed the GE offer in terms of asset valuation, strategic future and jobs.
“Why would a superior offer be improved if it is superior already? There is no reason for us to discuss that question at this time,” he told a joint news conference Tuesday.
Under the Siemens-MHI offer, Siemens would buy Alstom’s gas turbines business for €3.9 billion in cash while MHI would buy minority stakes in various Alstom power activities – to be held in three separate joint ventures – for €3.1 billion in cash. MHI is also offering to purchase a stake of up to 10 percent in Alstom from Bouygues telecoms, which now holds a 29 percent stake in the company.
In May Hollande’s administration extended its veto powers on foreign takeovers in sectors that are deemed strategic or in the national interest. It gave itself the power to block any Alstom deal on the grounds that it does not want the company – an innovator and major French employer – to sell the bulk of its business to a foreign firm without state approval.
Alstom makes France’s distinctive TGV high-speed trains and supplies power equipment that is used in around 40 percent of nuclear plants worldwide.
France's government, which regularly intervenes in corporate decisions, had suggested that the sale to American company GE was a threat to both energy independence and French jobs. Officials had pressed for more time to allow rival Siemens to state its interest.
French Economy Minister Arnaud Montebourg has made clear that he was unhappy that, as a private company, Alstom could “decide to sell 75 percent of a national jewel behind the backs of the employees, of the government, of most of the board and of the senior executives".
Alstom said in May that its board had voted unanimously to accept the GE offer, describing the proposal as “practically perfect" but adding that it had set up a committee of independent directors to review the bid.
"The proposed transaction would allow Alstom to develop its transport business as a standalone company, with a strong balance sheet to capitalise on opportunities in the dynamic rail transport market,” wrote Alstom Chairman and CEO Patrick Kron in a statement.
"Alstom’s employees would join a well-known, major global player, with the means to invest in people and technology," Kron added.
Designed 'to win over the govt'
Kaeser and Miyanaga told reporters and lawmakers that their plan gave Alstom a future in both power and transport and aimed to make a “proud French icon” even stronger.
Miyanaga also told French members of parliament he wanted France to take a matching 10 percent public stake in Alstom to demonstrate that the group would remain French.
The government is willing to do so via state bank BPI, said an Alstom trade unionist who met Montebourg on Tuesday. But Finance Minister Michel Sapin told Reuters he was not aware of such a plan.
Bouygues said it had also been contacted by MHI to take a stake alongside BPI.
Montebourg told trade unionists last week that the state and MHI were looking to take equal stakes in Alstom.
Some labour representatives welcomed the Siemens-MHI plan. The CFE-CGC union said GE would now have to offer a more balanced deal that would not dismantle the French group.
GE is offering to buy all of Alstom’s energy arm – which includes its thermal power, renewable power and grid businesses, and accounts for 70 percent of its revenue.
Some analysts said the Siemens-MHI offer could also be more attractive for Alstom in valuation terms and noted it would leave the company controlling most of its existing energy business.
But others argued that the offer would result in a more complex outcome that gave priority to political concerns.
“GE’s offer has the merit of being clear and coherent, something the Alstom board should appreciate,” Aurel BGC strategist Tangi Le Liboux wrote in a note to clients.
“The MHI-Siemens offer is designed to win over the government."
GE has, meanwhile, ramped up its charm offensive in the French media with advertisements saying an alliance with Alstom would create a global energy leader.
(FRANCE 24 with REUTERS)
Date created : 2014-06-18