GE-Alstom pact hangs on Bouygues deal

June 22, 2014 - 8:45:15 am
French Economy Minister Arnaud Montebourg in Paris yesterday.

PARIS: Talks on an industrial tie-up between Alstom and General Electric entered a critical phase yesterday, as the French government wrangled with Alstom shareholder Bouygues over a key plank of the transaction.

Sources close to the negotiations said talks were continuing over the price at which the French state would acquire 20 percent of Alstom from Bouygues — a condition for government approval of Alstom’s alliance with GE in preference to a rival Siemens-Mitsubishi offer.

The US conglomerate’s offer for key assets of transport and energy giant Alstom expires tomorrow, but the sources said they were optimistic a final deal would be reached before then. “Negotiations on price are always like this,” one of the sources said. “We don’t imagine for a moment that any of the parties would shirk their responsibilities in this alliance.”

A statement expected from GE failed to materialise amid French media reports of a stalemate in the stake purchase talks.

GE and Alstom declined to comment, while a Bouygues spokesman did not return calls and messages.

French President Francois Hollande applied more pressure to Bouygues, telling reporters in Paris he expected rapid progress in the stake purchase talks. “This is a major condition for the government’s acceptance of the alliance,” Hollande told reporters in Paris. “That’s why I believe we will make progress by the end of the day.” Without an acceptable deal on the Bouygues stake, he added, “it would be necessary to reconsider the alliance as it has just been announced”.

The battle over Alstom rapidly became politicized after initial reports in April of an imminent GE bid, with the government first weighing in to court a rival offer from Siemens, later joined by Mitsubishi Heavy Industries.

After revised offers from both bidders, Economy Minister Arnaud Montebourg finally announced state backing on  Friday for a GE-Alstom deal valuing Alstom’s energy business at €12.35bn. But the official green light remains subject to strict conditions agreed with GE as well as the government’s successful purchase of a 20 percent stake from Paris-based Bouyues.

Montebourg said the French state was prepared to pay only market price for the Alstom shares, which closed at 28 euros on Friday — about 20 percent short of their accounting value to Bouygues.

Montebourg also said he had sent a letter of intent to GE head Jeff Immelt laying out the terms of the alliance, chosen over a rival offer from Germany’s Siemens and Japan’s Mitsubishi Heavy Industries.

French Prime Minister Manuel Valls also hailed the sweetened GE offer, which includes a government veto over sensitive nuclear energy technology.

The firebrand French economy minister blamed EU competition rules for thwarting a deal with Siemens, accusing Brussels of blocking the creation of European industrial giants. Under the proposal, the French state would take a controlling 20 percent stake in power-to-rail group Alstom by buying two-thirds of the shares owned by Bouygues as a show of “patriotic vigilance”, Montebourg said. Agencies

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