France secures Alstom stake optionComment on this story
Paris - France won an option to buy 20 percent of Alstom from construction group Bouygues on Sunday, in an eleventh-hour deal clearing the way for the agreed sale of Alstom's energy business to General Electric.
The government had backed the tie-up on condition that it first secured the Alstom stake from Paris-based Bouygues - leaving less than three days to negotiate an agreement before GE's formal offer expires on Monday.
Ministers are determined to maintain influence over a complex deal that parks some Alstom assets deemed strategically important to France within GE-controlled joint ventures.
“This is a way of organising ourselves in the face of globalisation,” Economy Minister Arnaud Montebourg told France 2 television after announcing the option agreement.
“It builds alliances rather than allowing France to become a giant shopping centre for foreign corporations to come and prey on our companies,” he said.
GE and rival bidder Siemens - later joined by Mitsubishi Heavy Industries - had both revised their offers as France sought guarantees on jobs and sensitive activities.
The US group's 7.3 billion euro ($9.9 billion) cash outlay brings Alstom shareholders a smaller windfall than envisaged at first, with a narrower perimeter of activities sold outright.
Despite the concessions, granted in response to French concerns, the revised plan “remains accretive in year one”, GE chief Jeff Immelt said on Saturday.
Alstom said the same day its board had unanimously approved the deal, which values the business at 12.35 billion euros.
Under its terms, GE is to buy most Alstom energy assets including gas and steam turbines for power plants, while selling its own rail signalling division for $800 million to reinforce Alstom's transport offering, which includes TGV trains.
The tie-up also establishes joint ventures in France to house Alstom's power grid and renewable energy businesses, while sensitive nuclear turbines are placed under government control.
In an interview with France's Journal du Dimanche, Alstom chief Patrick Kron said he would bow out in favour of a new management team after an unspecified transition period.
The deal with GE draws a line under a two-month battle for Alstom that had become heavily politicised as soon as the first reports of a tie-up plan appeared in April.
Luc Chatel, the centre-right party's acting head, described the accord negotiated by Montebourg as a “lose-lose deal” on Sunday and questioned the use of public funds.
“There was an (earlier) offer on the table that would have avoided a public investment,” Chatel said.
The option deal with Bouygues ends a stand-off that followed Montebourg's surprise declaration on Friday that the government would pay only “market price” for its Alstom stock. The shares closed at 28 euros the same day.
Raising the pressure in a weekend newspaper interview, Montebourg said that “gifts to (CEO) Marin Bouygues are out of the question”.
But Bouygues balked at the strong-arm tactics, sources close to the talks said, holding out for a price closer to 34 euros - a premium of 380 million euros or 21 percent over the holding's 1.73 billion market capitalisation
Under the compromise, Bouygues will lend Alstom stock commanding 20 percent of voting rights to the French government and surrender its two board seats, allowing the state to exercise an immediate role as the group's main shareholder.
For 20 months, the government will then have an option to purchase up to 20 percent of Alstom from Bouygues - which currently holds 29.3 percent - with a 2-5 percent discount, at any point when the market price is 35 euros or more.
If the government has not acquired 20 percent of Alstom by the end of that period, either from Bouygues or the market, it can purchase up to 15 percent from Bouygues with a similar mark-down, whatever the quoted share price.
The loan of Alstom stock will be free of charge to the government, a Bouygues spokesman said, declining to comment on financial terms for the accompanying purchase option.
Subject to regulatory and shareholder approval, the GE-Alstom deal is scheduled to close in early 2015. - Reuters