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 Earlier on Friday, Alstom chief executive Patrick Kron confirmed to
union representatives that there were talks about an "industrial
deal," but did not name GE.
The sources said a deal could be announced in the coming days after
a board meeting on Friday afternoon. Both sources said it was Alstom,
which makes power turbines and railway equipment, which had made the
initial approach, and that Alstom's main shareholder, French
conglomerate Bouygues <BOUY.PA> with 29 percent, was backing the
deal.
Alstom, Bouygues and General Electric declined to comment.
French Economy Minister Arnaud Montebourg promised in an interview
with Le Monde newspaper to protect the national interest and to
study "other solutions and scenarios" for Alstom, one of the
country's top private-sector employers.
He said he planned a meeting with GE management and had already met
Kron on Thursday.
Alstom employs 18,000 people in France, about 20 percent of its
global workforce.
Trading in Alstom shares was suspended pending a statement from the
company. The shares closed up 10.9 percent on Thursday after
Bloomberg reported that GE was in talks about a $13 billion full
takeover bid for Alstom.
GE, with a market capitalization of $265 billion, is about 23 times
bigger than Alstom, valued at around $11.5 billion.
A deal to sell a power division beset by weak demand, low margins
and industry oversupply to GE calls into question Alstom's existing
plans to sell non-core assets and a stake in its transport arm to
fill a hole in its balance sheet.
Kron told union representatives on Friday that there was no
guarantee a deal would go through but he hoped to have answers for
them "in the coming days", union sources said.
The head of Alstom's transport arm told Reuters in February the
group was looking to list the unit separately as early as June if a
trade buyer couldn't be found any sooner. De facto, if a deal with
GE left Alstom with just its transport arm, a listing would no
longer be needed.
"We will see what tomorrow brings," Kron reportedly told unionists.
"I have to ensure a future for each of the group's units."
DEJA VU
Alstom was bailed out by the French state in 2004 and relies heavily
on orders from national rail operator SNCF and utility EDF <EDF.PA>.
The group announced 1,300 job cuts last year and put assets up for
sale to raise cash, including a stake in its transport business,
which makes France's prized high-speed TGV trains. It also floated
the possibility of an IPO of the business.
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Ten years ago, when France was negotiating a bailout package for
Alstom with European Competition Commissioner Mario Monti, German
group Siemens <SIEGn.DE> was in the frame as a potential buyer of
its power arm. In the end, the then French president, Nicolas
Sarkozy, balked at that prospect of German ownership, and Alstom
stayed intact.
A report Friday's Le Figaro newspaper said Alstom has looked at a
similar potential asset swap with Siemens more recently, whereby
Alstom would have exchanged its power business against Siemens' rail
business. Siemens declined to comment.
Before the takeover bid report, Alstom shares had slumped 20 percent
in 12 months on concerns over its cash flow. Those concerns prompted
Bouygues to take a $1.9 billion writedown on its Alstom stake in
February.
For GE, a deal could help the U.S. group get infrastructure assets
cheaply and make cost savings in power generation. For instance, GE
is looking to expand in smart grid technology, where Alstom is a
strong player.
"We believe the recent reports that GE may only be interested in
Alstom's power and grid businesses may reflect GE's goal to minimize
challenges by the French government," William Blair analyst Nick
Heymann said in a research note.
"The 'black box' related to this potential transaction remains the
French government and GE's ability to secure the ability to
restructure any nominally profitable Alstom assets it might
acquire."
(Additional reporting by Natalie Huet, Gilles Guillaume, Matthieu
Protard, Dominique Vidalon, John Irish and Raoul Sachs in Paris,
Lewis Krauskopf in New York; writing by Andrew Callus and Natalie Huet;
editing by Elaine Hardcastle)
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