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 President Francois Hollande held talks with GE boss Jeff Immelt on
Monday morning and sat down later with Siemens CEO Joe Kaeser to
discuss the fate of Alstom, the maker of the country's prestigious
TGV high-speed trains and turbines for power plants.
"We won't let Alstom sell this national champion behind the back of
its shareholders, its employees and the French government," Economy
Minister Arnaud Montebourg wrote on his official Twitter account
before the meetings started, accusing Alstom's CEO Patrick Kron of
"a breach of national ethics".
Alstom, which is battling with big debts and falling demand, was
bailed out by the French government in 2004 but now needs help
again. Smaller than its suitors, it was hardest hit by a slump in
orders for power equipment since the 2008 economic downturn
depressed electricity prices.
Monday's meetings follow a weekend of drama when Alstom's German
rival Siemens proposed exchanging part of its train business plus
cash for Alstom's power arm to counter a potential Alstom-GE energy
tie-up. Montebourg said the Siemens plan would create "two European
and global champions".
Berlin weighed in on Monday morning, saying an Alstom-Siemens deal
could offer "great opportunities" for Franco-German cooperation.
Siemens also re-confirmed its interest in an Alstom deal.
After GE CEO Immelt emerged from talks at the presidential palace
late on Monday morning, the company issued a statement calling the
dialogue "open, friendly and productive".
"It was important to hear in person President Hollande's perspective
and to discuss our plans ... We understand and value his
perspective, and are committed to work together," it said.
Hollande and Montebourg have said their concerns are related to
jobs, the nation's energy independence, and the location of
activities both in power and rail. A source familiar with the
discussions said GE had offered some solutions to these concerns but
that there was still a lot of work to do.
Montebourg said before the meeting with GE that France would oppose
any deal it considered unsuitable. But the minister, who has
threatened in the past to nationalize assets belonging to steelmaker
ArcelorMittal, stopped short of suggesting the state would do the
same for Alstom.
"It's too early to raise that question," he said.
In the evening, Hollande met with Kaeser from Siemens and with
Martin Bouygues, the billionaire chairman of family conglomerate
Bouygues, which is Alstom's largest shareholder, with a 29.4 percent
stake.
Kaeser later issued a statement that he had had a "very open,
trustful and amicable exchange" with Hollande and Montebourg, and
the Siemens board would convene as soon as possible to decide
whether to make an offer.
Immelt arrived in Paris during the weekend, aiming to hammer out a
$13 billion deal to buy Alstom's power turbines business. News of
talks between the two surfaced last week, and sources with knowledge
of them say they have been going on for months and are very
advanced.
However, Siemens may also be working on refining its proposal, a
second source with knowledge of the talks said.
"It is clear that Siemens wants to remain in the race. They could
come back with a more binding offer or with another, more detailed
letter addressing some of the issues pointed out in the press, such
as antitrust and jobs."
A third source said it should confirm its offer on Tuesday.
ASSET SWAP
Analysts see sense in an Alstom-GE tie-up. GE is relatively weak in
turbines for nuclear and coal power generation, where Alstom is
strong, and the French group's established base of power
installations generated 70 percent of its global revenue in the last
year. A deal would also enable GE to expand into offshore wind power
and grid technology.
Such a beefed-up GE would be a tough competitor for Siemens, hence
its counter-attack, say industry sources.
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Citi analysts estimate that combined with Alstom, Siemens could
account for 50 percent of the world's installed power capacity, well
ahead of GE's 25-28 percent.
GE has struck 50 deals worth more than $125 billion that have
been approved by the EU in the past decade. That includes the
acquisition of French motor maker Converteam for about $3 billion in
2011.
Siemens, like Alstom, makes high-speed trains and other rolling
stock as well as power station turbines, and according to sources
familiar with its plan is proposing an asset swap that would make
Alstom a more significant rail transport player while enhancing its
own turbines and power grid equipment business.
Its proposal also offers Alstom some cash, and puts an enterprise
value of around 10 to 11 billion euros ($14-$15 billion) on Alstom's
power arm.
Sources close to the talks said that at this stage, the cash in GE's
offer was more attractive to Alstom's top shareholder Bouygues, and
would also help Alstom finance strategic acquisitions to grow as a
pure player in transport.
"Meanwhile, Siemens wants to offload a declining business that's
partly redundant with Alstom's — that's not very attractive," one of
the sources said.
NATIONALIZATION?
A deal with Siemens — an option floated a decade ago but rejected by
both Alstom's CEO Kron and then-president Nicolas Sarkozy — could be
more complicated to carry out, due to more overlap and antitrust
issues than with GE, the sources said.
Alstom's unions warned a Siemens tie-up would mean big layoffs at
both companies. Alstom employs 18,000 people in France, about 20
percent of its total workforce, against GE's 10,000 French workers
and 7,000 for Siemens.
"Why not a Franco-French solution? Can't the French state intervene
directly by partly taking over the stake Bouygues holds?" the
CFE-CGC union said in a statement.
The CGT union meanwhile called for Alstom's nationalization. Labor
Minister Francois Rebsamen, asked about this option, told France
Inter radio: "I think nothing is out of the question at the moment."
Beyond Monday's brief statement, GE declined to comment. Bouygues
has limited itself to saying it supports Alstom's strategy. Siemens
said on Sunday it had written to Alstom about strategic
opportunities.
Siemens has hired Societe Generale and BNP Paribas to help it on a
possible deal swap with Alstom, according to sources with knowledge
of the situation who declined to be named.
Rothschild and Bank of America Merrill Lynch are advising Alstom on
the deal, while GE is working with Lazard and Credit Suisse, the
sources said. BNP and Societe Generale declined to comment; the
other banks were not immediately available for comment.
Alstom's shares are suspended from trading until Wednesday while it
considers its options. The shares, which had slumped earlier this
month to a near nine-year low, jumped at the end of last week to
reach their highest in five months.
(Additional reporting by Elizabeth Pineau, Nicolas Vinocur, Matthieu
Protard and Julien Ponthus in Paris, Arno Schuetze in Frankfurt and
Sophie Sassard and Anjuli Davies in London; editing by Sophie Walker
and Will Waterman)
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