France Fortifies Anti-Takeover Law as GE, Siemens Eye AlstomFrancois de Beaupuy, Helene Fouquet and Mark Deen
France gave itself the power to block foreign takeovers in what it considers strategic industries amid General Electric Co.’s $17 billion bid for Alstom SA’s energy units and a possible competing Siemens AG offer.
In a decree signed late last night by Economy and Industry Minister Arnaud Montebourg that broadens a 2005 law, foreign investment will need government approval in areas such as energy, equipment, plants and transportation that he said are critical for national security. The 2005 law had focused primarily on military and defense-related operations.
The move by Montebourg, 51, an admirer of Louis XIV’s dirigiste finance minister, Jean-Baptiste Colbert, follows a long tradition of French state intervention in business and is aimed at capping unemployment as the country struggles with a stagnant economy and record-high joblessness.
“This decree should have been done a long time ago,” Montebourg told journalists today in Paris. “You can’t ask countries to give up their strategic interests.”
The new rule, dubbed “le Decret Alstom” by local media, goes into effect tomorrow and brings France on a par with European neighbors such as Germany, Italy and Spain, Montebourg said. He also said it was “CFIUS Light,” referring to actions carried out by the Committee on Foreign Investment in the U.S. The committee investigated 40 transactions in 2011, according to the U.S. Treasury website.
“It’s the end of laisser-faire,” Montebourg said in an interview with Le Monde, adding that the European Union doesn’t sufficiently protect the assets of the region’s countries. “We have to arm ourselves at the national level. France can’t just make speeches while other states are taking action.”
European Union Financial-Services Commissioner Michel Barnier told reporters in Brussels that the body will review the new French decree.
“We need to make sure it doesn’t cover such a vast area that all transactions for purchasing a company would be subject to a national authorization because clearly that would be protectionism,” he said.
The new French decree puts pressure on GE to improve its offer, which Montebourg characterized today as an “absorption” of Alstom rather than an alliance that he said Siemens is proposing. Montebourg has openly come out in favor of a “European solution” for Alstom.
“There are talks with Siemens that are very constructive, which is not the case with GE,” he said. “We want alliances that give our companies a global scale. We don’t want dismantling.”
He is encouraging the German company to make a bid for Alstom’s energy assets and to offer its rail unit to the French company to counter GE’s offer.
Alstom CEO Patrick Kron backs GE’s offer, saying the French company lacks the critical mass to compete with its larger U.S. rival, Siemens and emerging market power-equipment suppliers. Alstom has given its board until the end of May to review GE’s bid and any rival offer.
“In one swift move, Montebourg has made himself key to determining Alstom’s fate, while rebalancing power around the GE-Alstom-Siemens negotiating table,” William Mackie, an analyst at Berenberg, said in a note. “With this new law, the risk that GE will reconsider its position increases, since additional concessions on a GE-Alstom deal will be sought.”
Shares of Alstom fell as much as 1.7 percent in Paris today, and traded down 1.4 percent at 28.91 euros at 2:57 p.m. Shares of Bouygues, which owns 29 percent of Alstom, fell as much as
GE and Siemens are circling Alstom to add turbines and other equipment for power plants and transmission networks amid rising infrastructure demand. While Alstom is looking to use the proceeds of a sale of energy units to bolster its train and signaling operations as well as pay down debt and reward shareholders, the French government wants to gain broader electorate support, Mackie said in the note.
President Francois Hollande said last week that GE’s proposal doesn’t go far enough to protect France’s strategic interests.
“If needed, the government will be able to ask specific commitments or set conditions for investments to warrant the interests of the country,” Montebourg said in a statement.
GE said today it believes it has the best offer for Alstom.
“We have noted the decree published today by the French government,” it said. “The industrial project we have presented is good for Alstom, its employees and for France. Our plan is to build a global energy business with four headquarters in France and to preserve and create jobs in France.”
According to an internal Siemens document obtained by Bloomberg, the decree “clearly aims at curbing GE’s zeal towards Alstom.” The sale of energy businesses might require the approval of France’s economy minister and the decree could also influence any transaction related to the rolling stocks and signaling activities, according to the document.
Montebourg, who during the Socialist primaries in 2011 campaigned as the champion of the anti-globalization part of the party, said today that France wants foreign investment, just not the kind that would “dismantle our crown jewels.”
He said he'd had no problem with the Publicis Omnicom merger -- which has been called off -- and that the French advertising company’s chief executive officer, Maurice Levy, had told him of the plan before it was announced, saying it was a combination of equals.
Similarly, Lafarge Chief Executive Bruno Lafont told him about the merger with Holcim and has committed to keeping R&D in France even though the headquarters will be in Switzerland, Montebourg said.
‘Back in the Game’
The new decree gives the government a bigger time window to try to convince Siemens to make an offer, said Pierre Boucheny, a Paris-based Kepler Cheuvreux analyst who recommends buying Alstom shares.
“It’s given Montebourg the means to get back in the game,” he said.
The minister showed he was well aware of that.
“We were sitting on a folding stool, now we are sitting at the table,” he said.