News / Economy

Alstom Studies GE Offer, Leaves Door Ajar for Siemens

Road signs indicate directions for deliveries to French power and transport engineering company Alstom and U.S. conglomerate General Electric, Belfort, France, April 27, 2014.
Road signs indicate directions for deliveries to French power and transport engineering company Alstom and U.S. conglomerate General Electric, Belfort, France, April 27, 2014.
Reuters
Cash-strapped French engineering group Alstom said on Wednesday it would study a $16.9 billion offer from General Electric for its energy arm but left the door open for a rival bid from Germany's Siemens.

Alstom gave Siemens until the end of May to propose its own deal after the government of President Francois Hollande balked at the U.S. group's overtures last week, insisting any outcome must safeguard jobs at the one-time champion of French industry, while ensuring the nation's energy independence.

Yet GE remained ahead in the race to secure assets which would boost its position in producing steam turbines for power stations and technology for electricity grids. Economy Minister Arnaud Montebourg — who was furious when news of the deal emerged last week — softened his tone towards the U.S. group, which he said was “a serious company.”

“We have a good relationship with GE,” Montebourg told a parliamentary committee after Alstom confirmed in a statement it was reviewing the GE offer.

“We are ready to discuss alliances, not an absorption. We prefer an equal alliance,” he said, citing GE's 40-year-old CFM jet engine venture in France with a unit of Safran as a good example of Franco-U.S. cooperation.

GE said its all-cash offer for Alstom's thermal power, renewable power and grid businesses — valued at 7.9 times pro forma earnings before interest, taxes, depreciation and amortization (EBITDA) — was based on an enterprise value of $13.5 billion and $3.4 billion of net cash.

Alstom's power assets account for around 70 percent of annual turnover, which was 20.3 billion euros ($28 billion) last year.

Considered by many analysts too small to survive alone in the energy sector, Alstom said a GE deal would allow it to re-focus on transport including making TGV high-speed trains.

“Alstom would use the sale proceeds to strengthen its transport business and give it the means of an ambitious development, pay down its debt and return cash to its shareholders,” the group said in a statement.

Alstom shares, suspended since last week, were up 9.6 percent at 29.59 euros at 0940 GMT after trading resumed. They had halved in value over the last four years on concerns over its cash flow since the 2008 economic crisis hit order books.

GE Chief Executive Jeff Immelt said talks with the French government on his company's offer had been productive and expressed confidence that it would go through.

“We think we've got a good deal and it's going to be executed,” Immelt told reporters in Paris. “We think net employment in France will grow around the Alstom assets.”

Industry sources note Alstom is strong in steam turbines used by the nuclear industry, while GE is a top player in gas turbines. A deal would enable GE to expand into grid technology.

With the Alstom deal, GE expects its industrial businesses to contribute about 75 percent of company operating earnings by 2016, up from about 55 percent last year.

No soliciting

Alstom was bailed out by the French state in 2004 and relies heavily on orders from national rail operator SNCF and utility EDF. It employs 18,000 people in France, half of them in the power business, out of 93,000 worldwide.

Alstom said its board also noted a declaration of interest from Siemens on an alternative deal and that the German company would have access to information needed to make a binding offer.

It added that French group Bouygues, which has a 29 percent stake in Alstom, had promised not to sell its shares until the deal had won final approval of shareholders.

The agreement means Alstom cannot solicit offers from third parties to purchase all or part of its energy business but can respond to unsolicited offers for the entire energy arm. If it recommends GE's offer, Alstom would pay a fee of 1.5 percent of the purchase price if it then backed another offer.

Siemens said it had decided to make an offer provided it was given access to Alstom's data, as well as “permission to interview the management during a period of four weeks, to enable Siemens to carry out a suitable due diligence.”

Siemens declined to comment on Alstom's statement on the GE offer. German magazine Der Spiegel reported that Siemens had written to Alstom to complain about a lack of cooperation on the part of its chief executive Patrick Kron, who they said was not interested in direct talks.

Montebourg told parliamentarians his objections had halted what he called an over-hasty rush by GE and Alstom to clinch a deal. But he was more circumspect on how the government would seek to influence the review period for the U.S. offer.

He noted explicitly Alstom's promise that the review would take into account “all stakeholders' interests including the French state” and said it would examine a request by unions to raise its small 1 percent stake in the group.

However, he said the readiness of GE to leave under French control turbine assets vital to France's nuclear sector — which generates 75 percent of the country's power needs — meant France could not invoke strategic interests to block the deal.

Hollande, whose poll ratings are at record lows due to his failure to tackle unemployment stuck at above 10 percent, has said the government will place a priority on preserving jobs.

GE said on Wednesday that the takeover would boost its earnings immediately, predicting an additional 8-10 cents of earnings per share by 2016.

The U.S. group predicted that the integration would lead to efficiencies in supply chain, service infrastructure, commercial reach and new product development to generate more than $1.2 billion in annual cost savings by year five.

You May Like

Turbulent Transition Imperils Tunisia’s Arab Spring Gains

Critics say new anti-terrorism laws worsen Tunisia's situation while others put faith in country’s vibrant civil organizations, women’s movement More

Burundi’s Political Crisis May Become Humanitarian One

United Nations aid agencies issue warning as deadly violence sends tens of thousands fleeing More

Yemenis Adjust to Life Under Houthi Rule

Locals want warring parties to strike deal to stop bloodletting before deciding how country is governed More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Texas Town Residents Told to 'Just Leave' Ahead of Flood Threati
X
Greg Flakus
May 29, 2015 11:24 PM
Water from heavy rain in eastern and central Texas is now swelling rivers that flow into the Gulf of Mexico, threatening towns along their banks. VOA’s Greg Flakus visited the town of Wharton, southwest of Houston, where the Colorado River is close to cresting.
Video

Video Texas Town Residents Told to 'Just Leave' Ahead of Flood Threat

Water from heavy rain in eastern and central Texas is now swelling rivers that flow into the Gulf of Mexico, threatening towns along their banks. VOA’s Greg Flakus visited the town of Wharton, southwest of Houston, where the Colorado River is close to cresting.
Video

Video New York's One World Trade Center Observatory Opens to Public

From New Jersey to Long Island, from Northern suburbs to the Atlantic Ocean, with all of New York City in-between.  That view became available to the public Friday as the One World Trade Center Observatory opened in New York -- atop the replacement for the buildings destroyed in the September 11, 2001, attacks.  VOA’s Bernard Shusman reports.
Video

Video Seoul Sponsors Korean Unification Fair

With inter-Korean relations deteriorating over the North’s nuclear program, past military provocations and human rights abuses, many Koreans still hold out hope for eventual peaceful re-unification. VOA’s Brian Padden visited a “unification fair” held this week in Seoul, where border communities promoted the benefits of increased cooperation.
Video

Video Purple Door Coffeeshop: Changing Lives One Cup at a Time

For a quarter of his life, Kevin Persons lived on the street. Today, he is working behind the counter of an espresso bar, serving coffee and working to transition off the streets and into a home. Paul Vargas reports for VOA.
Video

Video Modular Robot Getting Closer to Reality

A robot being developed at Carnegie Mellon University has evolved into a multi-legged modular mechanical snake, able to move over rugged surfaces and explore the surroundings. Scientists say such machines could someday help in search and rescue operations. VOA’s George Putic reports.
Video

Video Shanghai Hosts Big Consumer Electronics Show

Electronic gadgets are a huge success in China, judging by the first Asian Consumer Electronics Show, held this week in Shanghai. Over the course of two days, more than 20,000 visitors watched, tested and played with useful and some less-useful electronic devices exhibited by about 200 manufacturers. VOA’s George Putic has more.
Video

Video Forced to Return Home, Afghan Refugees Face Increased Hardship

Undocumented refugees returning to Afghanistan from Pakistan have no jobs, no support system, and no home return to, and international aid agencies say they and the government are overwhelmed and under-resourced. Ayesha Tanzeem has more from Kabul.
Video

Video Britain Makes Controversial Move to Crack Down on Extremism

Britain is moving to tighten controls on extremist rhetoric, even when it does not incite violence or hatred -- a move that some are concerned might unduly restrict basic freedoms. It is an issue many countries are grappling with as extremist groups gain power in the Middle East, fueled in part by donations and fighters from the West. VOA’s Al Pessin reports from London.
Video

Video 3D Printer Makes Replica of Iconic Sports Car

Cars with parts made by 3D printers are already on the road, but engineers are still learning about this new technology. While testing the possibility of printing an entire car, researchers at the U.S. Department of Energy recently created an electric-powered replica of an iconic sports roadster. VOA’s George Putic has more.
Video

Video Al-Shabab Recruitment Drive Still on In Kenya

The al-Shabab militants that have long battled for control of Somalia also have recruited thousands of young people in Kenya, leaving many families disconsolate. Mohammed Yusuf recently visited the Kenyan town of Isiolo, and met with relatives of those recruited, as well as a many who have helped with the recruiting.
Video

Video A Small Oasis on Kabul's Outskirts Provides Relief From Security Tensions

When people in Kabul want to get away from the city and relax, many choose Qargha Lake, a small resort on the outskirts of Kabul. Ayesha Tanzeem visited and talked with people about the precious oasis.
Video

Video Kenyans Lament Losing Sons to al-Shabab

There is agony, fear and lost hope in the Kenyan town of Isiolo, a key target of a new al-Shabab recruitment drive. VOA's Mohammed Yusuf visits Isiolo to speak with families and at least one man who says he was a recruiter.
Video

Video Scientists Say Plankton More Important Than Previously Thought

Tiny ocean creatures called plankton are mostly thought of as food for whales and other large marine animals, but a four-year global study discovered, among other things, that plankton are a major source of oxygen on our planet. VOA’s George Putic reports.
Video

Video Kenya’s Capital Sees Rise in Shisha Parlors

In Kenya, the smoking of shisha, a type of flavored tobacco, is the latest craze. Patrons are flocking to shisha parlors to smoke and socialize. But the practice can be addictive and harmful, though many dabblers may not realize the dangers, according to a new review. Lenny Ruvaga has more on the story for VOA from Nairobi, Kenya.

VOA Blogs

World Currencies

EUR
USD
0.9115
JPY
USD
123.92
GBP
USD
0.6554
CAD
USD
1.2443
INR
USD
63.800

Rates may not be current.