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

Islamic State Survivor: A Yazidi Girl's Tale

Sarah Said Haydar, captured a year ago while fleeing Islamic State onslaught in northern Iraq, was so traumatized by militants, she sought to end her own life More

EU, US Applaud Kosovo Law on Special Court

Joint statement says lawmakers' decision to address allegations of war crimes 'demonstrated their commitment to the rule of law and to honor international agreements' More

ASEAN Ministers to Push for S. China Sea Agreements

According to documents obtained by VOA Khmer, ministers will stand up for 'freedom of navigation, unimpeded lawful maritime commerce, trade and over flight' 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.
Cambodia Makes Progress Curbing Bear Tradei
X
Robert Carmichael
August 04, 2015 3:07 PM
Cambodia’s wild bears are under unprecedented pressure. Their native forests are being cut down at record rates, and China's huge demand for traditional medicine has made them targets. But experts say Cambodia's conservation efforts are setting an example that has put it well ahead of its neighbors in protecting bears. Robert Carmichael reports for VOA from Phnom Penh.
Video

Video Cambodia Makes Progress Curbing Bear Trade

Cambodia’s wild bears are under unprecedented pressure. Their native forests are being cut down at record rates, and China's huge demand for traditional medicine has made them targets. But experts say Cambodia's conservation efforts are setting an example that has put it well ahead of its neighbors in protecting bears. Robert Carmichael reports for VOA from Phnom Penh.
Video

Video Growing Number of E. Jerusalem Palestinians Seek Israeli Citizenship

Most Palestinians living in East Jerusalem have long rejected the option of full Israeli citizenship, seeing it as a betrayal to their political cause - the formation of a Palestinian state with East Jerusalem as its capital. But as that dream remains elusive, more and more Palestinians are applying for Israeli citizenship. Zlatica Hoke reports the decision is hard for many Palestinians who say they have to be pragmatic about it.
Video

Video With No Money, More Students, African Universities Struggle

Academics from around the African continent converged in Johannesburg last week for the African Universities Summit, a chance to tackle some of the major issues facing higher education in Africa today. VOA's Anita Powell reports from Johannesburg.
Video

Video Iraqi Yazidis Fear Death of Their Community

A year ago on August 3, Islamic State militants stormed the homelands of Iraq’s Yazidi minority, killing hundreds of men and enslaving thousands of women. The scenes of desperate Yazidi families crowding on the top of Sinjar mountain without food or water spurred Kurdish fighters into action, an emergency airlift and the start of the U.S. airstrike campaign against the Islamic State Sunni extremists. VOA's Sharon Benh reports from northern Iraq.
Video

Video Bangkok Warned It Soon Could Be Submerged

Italy's Venice and America's New Orleans are not the only cities gradually submerging. The nearly ten million residents of the Bangkok urban area now must confront warnings the city could become uninhabitable in a few decades. VOA Correspondent Steve Herman reports from the Thai capital.
Video

Video Inclusive Gym Gets People With Disabilities in Fitness Spirit

Individuals with special needs are 58 percent more likely to be obese than the general population. According to the U.S. Centers for Disease Control, they also have an increased likelihood of anxiety, depression and social isolation. But a sports club outside Washington wants to make a difference in these people's lives. With Carol Pearson narrating, VOA's June Soh reports.
Video

Video Wisconsin's Voter ID Law Still Mired In Controversy

Voter ID laws have sparked controversy across the US. More than 30 states enacted laws requiring citizens to show identification before they vote. Against fierce opposition, the state of Wisconsin recently enacted one the most restrictive voter ID laws in country. As Jeff Swicord reports, no one can predict its impact as the 2016 election nears.
Video

Video Astronauts Train Underwater for Deep Space Missions

Manned deep space missions are still a long way off, but space agencies are already testing procedures, equipment and human stamina for operations in extreme environment conditions. Small groups of astronauts take turns in spending days in an underwater lab, off Florida’s southern coast, simulating future missions to some remote world. VOA’s George Putic reports.
Video

Video Ebola Vaccine Hailed as Highly Effective

At last, there's a way to end the suffering from the Ebola epidemic that has ravaged West Africa for more than a year. Researchers say the vaccine is so effective, there may never be a major outbreak of Ebola again. VOA's Carol Pearson reports.
Video

Video Special Olympics Show Competitors' Skill, Determination

Special Olympics competitions will wrap up Saturday in Los Angeles, and the closing ceremony for athletes with intellectual disabilities will be held Sunday night. In a week of competition, athletes have shown what they can do through skill and determination. VOA's Mike O'Sullivan reports.
Video

Video Civil Rights Leaders Struggled to Achieve Voting Rights Act

Fifty years ago, lawmakers approved, and U.S. President Lyndon Johnson signed, the Voting Rights Act of 1965. The measure outlawed racial discrimination in voting, giving millions of blacks in many parts of the southern United States federal enforcement of the right to vote. Correspondent Chris Simkins introduces us to some civil rights leaders who were on the front lines in the struggle for voting rights.
Video

Video Shooter’s Grill: Serving Food with a Touch of the Second Amendment

Shooter's Grill, a restaurant in Rifle, Colorado, attracts visitors from all over the world as well as local patrons. The reason? Waitresses openly carry loaded firearms as they serve food, and customers are welcome to carry them, too. VOA's Enming Liu and Lin Yang paid a visit to Shooter's Grill, and heard different opinions about this unique establishment.
Video

Video Despite Controversy, Business Owner Continues Sale of Confederate Flags

At Cooter’s, a store in rural Sperryville, Virginia, about 120 kilometers west of Washington, D.C., Confederate flags are flying off the shelves. The red, white and blue battle flag, with 13 white stars representing the Confederate states, was carried by southern forces during the U.S. Civil War in the 1860s. The South had seceded from the Union over several key issues of disagreement, including slavery. VOA’s Deborah Block has the story.
Video

Video Booming London Property a ‘Haven for Dirty Money’

Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Hometown of Boy Scouts of America Founder Reacts to Gay Leader Decision

Ottawa, Illinois, is the hometown of W.D. Boyce, who founded the Boy Scouts of America in 1910. In Ottawa, where Scouting remains an important part of the legacy of the community, the end of the organization's ban on openly gay adult leaders was seen as inevitable. VOA's Kane Farabaugh reports.

VOA Blogs

World Currencies

EUR
USD
0.9113
JPY
USD
124.00
GBP
USD
0.6404
CAD
USD
1.3130
INR
USD
63.752

Rates may not be current.