Less than two weeks after brokering the marriage of utility groups Gaz de France (GAZ.PA) and Suez (SZE), French President Nicolas Sarkozy is eyeing another big industrial tieup. On Sept. 11, shares in state-controlled nuclear company Areva (CEPFI.PA) and engineering group Alstom (ALSO.PA) rose sharply on news reports that the government might seek to merge them. A presidential spokesman confirmed discussions were under way about Areva's future, but declined to elaborate.
Such a linkup would create a global giant with a $55 billion market capitalization, joining Areva's nuclear power business with Alstom units that build conventionally powered generating plants and equipment. The government would likely hold a controlling stake in the combined company, analysts say, with another major share going to French construction company Bouygues (BOUY.PA), Alstom's biggest stockholder. "This is a pure political play," to secure France's global position in the power industry, says Dieter Forniere, a Brussels-based analyst with Dexia Securities (DEXI.BR).
Alstom Chief Expected to Lead
But a merger would mark a defeat for Areva Chief Executive Anne Lauvergeon, who has long sought to privatize the company as a vertically integrated nuclear group, with activities ranging from uranium mining to nuclear-waste reprocessing. Market-watchers say the merged entity would probably be headed by Alstom CEO Patrick Kron, who has led a successful turnaround of the engineering group after then-Finance Minister Sarkozy orchestrated a $4.4 billion bailout in 2004.
Creating an all-French company would be complicated, though. German engineering group Siemens (SI) owns 34% of Areva's power-plant construction subsidiary, and Siemens says it wants to keep that stake. Chancellor Angela Merkel reiterated that position to Sarkozy during talks on Sept. 10.
In late afternoon Paris trading, Areva shares were up 2.5%, while Alstom was up 6.5%.