French victory in GE battle for Alstom

The French rail and energy giant Alstom said it will be able to protect French interest and save jobs after a deal worth $17 bln to sell off most of its power generation business to US rival General Electric.

“[It is] a combination of Alstom’s qualities and GE’s economic strength,” said Alstom chief Patrick Kron.

France approved the deal after securing an option to buy a 20% stake in Alstom allowing it a say in protecting French interests, after the company rejected a rival offer from Siemens and Mitsubishi Heavy Industries.

The agreement comes after months of negotiations and, as a result of the French government’s intervention, is substantially different from GE’s original offer, which had been for a straightforward purchase of Alstom’s power business.

The new deal, which the government supports, will see GE buy Alstom’s operations that manufacture natural gas turbines for power plants.

In turn, Alstom will buy GE’s railway signalling systems division. In addition, GE and Alstom will create three joint ventures, equally owned, for power grid, renewable energy and nuclear power businesses.

Alstom’s shares fell 1.8% in trading on Monday after the agreement with GE was announced.

“This is a way of organising ourselves in the face of globalisation. It builds alliances rather than allowing France to become a giant shopping centre for foreign corporations to come and prey on our companies,” said French economy minister Arnaud Montebourg.

A senior presidential aide said it was “perfectly natural” for the government to have intervened in the deal, noting nuclear power was strategically important. “Such a deal would have been impossible for a French company in the US,” he added.

Patrick Kron said buying a stake in Alstom would be a “good investment” for the French government.

“This is a company which has a strong potential of value creation and I’m expecting that all shareholders will benefit from this value creation,” he said.

However, Peter Ramsauer, chairman of the German parliament’s economics committee, criticised the French decision to favour the GE bid and reject the joint bid from Siemens and MHI.

“The French government acts with ice-cold national industrial interest, and the French government has clearly put its own national interests, one-sided French concerns, ahead of European interests,” he told German radio station Deutschlandfunk.

GE chairman and chief executive Jeff Immelt said the deal was “good for France, GE and Alstom”.

And many analysts believe it is a good deal despite the French government’s intervention.

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