France goes with US buyer for Alstom

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br imelts (42778651) Bloomberg Jeffrey Immelt, the chairman and chief executive of US-based General Electric, says that the company now moves into the next phase of the Alstom alliance. Photo: David Paul Morris/Bloomberg

Bloomberg New York and Paris

GENERAL Electric (GE) is closer to its biggest acquisition, a $17 billion (R181bn) deal for Alstom’s energy assets.

The French company’s board approved the offer, and the firms announced an agreement at the weekend. Talks are continuing for France to buy a 20 percent stake in Alstom from shareholder Bouygues, a condition set by the government to back GE’s purchase.

The government and Bouygues were near an accord, said two sources.

GE prevailed over a Siemens counter-proposal and initial French opposition that triggered a sweetened offer.

The chief executive of Siemens said yesterday the German engineering group was ready to resume talks with Alstom should it fail to agree terms with GE.

“We are still open for talks. The doors are open for Alstom and the French government,” chief executive Joe Kaeser was quoted as saying by German tabloid Bild.

“It is not over yet,” he added.

In a letter to Siemens staff, Kaeser said he regretted that Alstom had not been open to Siemens’ proposal but that Siemens could now focus on its ongoing restructuring measures to boost profitability.

“That’s why we won’t particularly miss the ‘fight over Alstom’, as our negotiations have been dramatised in the public debate,” Kaeser told employees.

GE is buying Alstom’s gas turbine operations and creating joint ventures in the steam turbine, renewable energy and electrical transmission businesses; the French company gets GE’s rail-signaling operations for e602 million (R8.7bn).

“We will now move to the next phase of the Alstom alliance,” said chief executive Jeffrey Immelt. GE predicted a 2015 closing and said the valuation had not changed since it made a formal offer on April 30.

Alstom said the sale proceeds would help bolster its train, metro and signaling business; pay down debt; return cash to shareholders; and invest about e2.5bn in ventures being formed with GE in steam turbines, renewable energy and power transmission gear.

“The combination of the very complementary energy businesses of Alstom and GE would create a stronger entity,” said Alstom chief executive Patrick Kron.

Alstom built France’s power grid and makes the high-speed TGV trains, as well as the generators that produce most of the nation’s electricity.

Messages left for spokesmen for the government and Paris- based Bouygues, a construction company, about their discussions were not returned.

France’s stake in Alstom would be acquired at market prices from Bouygues, Economy Minister Arnaud Montebourg said on Friday. The state would block the GE deal if France could not reach an agreement on the investment.

“It’s a prerequisite that France takes 20 percent of the capital,” Montebourg said.

Alstom closed on Friday at e28, valuing the company at e8.64bn. Bouygues’s current stake is about 29 percent, which it values at e34 a share.

Alstom’s board had set a deadline of today to consider offers for the energy business, with Germany’s Siemens also in the running until the government said it favoured GE.

French law permits state intervention to block acquisitions of companies deemed to be of national importance. In 2005, France passed an anti-takeover decree amid speculation PepsiCo planned to bid for dairy products maker Danone.

For Immelt, securing France’s backing marks a victory for his lobbying campaign to soothe local political concerns. GE refined its offer by proposing alliances in nuclear technology and rail, and adding safeguards to its pledge to create 1 000 local industrial jobs. Additional reporting by Reuters


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