London and Paris - The battle for Alstom intensified after Siemens stepped up plans for a bid to counter General Electric (GE) in what would be the biggest tug of war for a French industrial company ever.
Siemens is making preparations to bid for Alstom assets, under the condition that it gains the same access to financial information that GE has, according to people familiar with the plans, who asked not to be named as the matter is not public. Siemens was due to decide on a bid after a board meeting set for yesterday.
Alstom, a maker of power transmission gear and high-speed TGV trains, became the object of competing interests after talks with GE progressed in recent weeks, with the US company aiming to buy its energy assets, which generate more than 70 percent of sales.
Siemens chief executive Joe Kaeser and chairman Gerhard Cromme on Monday met with French President François Hollande, as did Jeffrey Immelt, GE’s chief executive.
Alstom, saved from bankruptcy about a decade ago by the state, employs 18 000 people in France and has a market value of about e8.3 billion (R122.2bn). The business is coveted by the government, which wants to extract the best terms from any bidder for jobs and the country’s energy independence. The state did not prefer one bidder over the other, another person said.
Alstom, which has already received a binding offer from GE, asked Siemens to send another letter with more details of its proposal before giving the German company additional information, the people said. Representatives for Siemens and Alstom declined to comment on their plans.
Both GE and Siemens have taken steps to appease French policymakers for a deal with Alstom. GE was arguing that its plan, to acquire the energy business while Alstom’s transport unit was separated, would result in fewer job losses because of smaller operational overlaps, people with knowledge of the matter said. Siemens was willing to make guarantees about jobs and executive positions.
Siemens’s proposal will probably entail swapping some of its rail assets for Alstom’s energy division and creating two “European champions”, Industry Minister Arnaud Montebourg has said. Siemens would become one of the largest manufacturers of equipment for power plants and electric transmissions, while the companies’ train assets would form a France-based rail industry leader, bringing together the German company’s ICE high-speed trains with Alstom’s iconic TGV.
Siemens had not yet decided whether to bid for all or part of the French company, one person said. GE had conducted due diligence and received approval to proceed with the deal from its own board. Alstom’s board was scheduled to meet yesterday to review the proposals, one person said.
The board of Alstom, which is based on the outskirts of Paris, so far prefers GE’s proposal, according to people familiar with the matter. However, it was also considering Siemens’s offer out of deference to the government’s wishes.
Hollande told Alstom to take its time weighing the offers and to not be bound by today’s deadline, which the company had set to make a decision, one of the people said.
Siemens did not have to make a binding offer this week, another person said.
“None of these big players buying Alstom is going to be a smooth ride,” Simon Toennessen, an analyst at Credit Suisse Group, said. “Siemens is seeing the competitive threat from GE as big enough to consider this step.”
Switzerland’s ABB, the largest maker of transformers, was observing the situation, chief executive Ulrich Spiesshofer said. The French state shareholding agency never considered selling a stake in Électricité de France (EDF) to back Alstom, a person familiar with the matter said. Le Nouvel Observateur reported that the government was studying selling some of its holding in EDF to raise funds to buy Bouygues’s stake in Alstom and also inject funds. – Aaron Kirchfeld, Alex Webb and Jacqueline Simmons for Bloomberg