GE Revises Alstom Bid With Alliances to Court France

General Electric Co. refined its bid for Alstom SA’s energy assets by adding alliances in rail and nuclear technology to head off a Siemens AG-led counterproposal and win France’s backing.

The original $17 billion offer will be pared as GE sells its rail-signaling operations to Alstom, which in turn will keep a stake in joint ventures being formed in power grids and renewables, Chief Executive Officer Jeffrey Immelt said today in Paris, without giving a figure. GE and France’s Alstom also will create a nuclear-energy partnership.

The revised plan, which doesn’t change the valuation on Alstom’s energy assets, seeks to appease French politicians demanding job guarantees and concessions on energy independence. Immelt’s lobbying of French officials and union leaders underscored the urgency GE attaches to its biggest-ever deal.

“It really comes down to: Does this new offer have enough in it to satisfy the French government?” said Christian Mayes, an Edward Jones & Co. analyst based in Des Peres, Missouri, who rates GE as hold. “From the government’s perspective this may look like an improved offer, even though financially it may not look that different.”

Immelt will meet tomorrow with President Francois Hollande to discuss GE’s updated offer, which Finance Minister Michel Sapin called “a significant improvement.” France is now evaluating the GE and Siemens offers, Sapin said.

‘Right’ Action

“This shows the government was right to intervene,” Sapin told reporters today in Luxembourg. “Happily, we acted.”

Hollande also will meet with representatives from Siemens and partner Mitsubishi Heavy Industries Ltd. tomorrow after a session with his cabinet on the Alstom deal. Economy Minister Arnaud Montebourg, who has been critical of GE, told Alstom union representatives that Siemens and Mitsubishi had improved their bid for the French company’s energy business.

Under the new proposal, Mitsubishi would offer to buy 40 percent of Alstom’s grid and renewable units instead of 20 percent, and Siemens would offer to create a rail-signaling joint venture with Alstom, said Claude Mandart, a representative of the CFE-CGC union who met with the minister.

Montebourg told union members the new bid would be an 800 million euro ($1.09 billion) improvement over the previous Siemens-Mitsubishi offer, Mandart said in a telephone interview. He said it wasn’t clear whether that figure was to be applied to the valuation of the deal or just to the cash payout to Alstom.

Alexander Becker, a spokesman for Munich-based Siemens, declined to comment.

Siemens, Mitsubishi

Together with Japan’s Mitsubishi and Hitachi Ltd., Siemens countered GE this week with an offer valuing Alstom’s energy assets at 14.2 billion euros. That plan also proposes merging the train operations of Siemens and Alstom. GE made a binding, all-cash bid for Alstom’s operations that make turbines and power transmission equipment on April 30. Alstom said it would consider proposals before a June 23 deadline.

Under GE’s latest plan, the U.S. company and Alstom each would hold 50 percent stakes in the power grids and renewables ventures. The deal structure, including the sale of the signaling business, could reduce GE’s cash payment by about 25 percent to 30 percent, according to Nicholas Heymann, a New York-based analyst at William Blair & Co.

Alstom fell 6 percent, the most since January, to 27.70 euros in Paris, while Siemens gained 1.1 percent to 99.94 euros. Fairfield, Connecticut-based GE rose 1 percent to $26.93 at the close in New York.

Transport Alliance

GE and Alstom signed a memorandum of understanding to create a global alliance in transportation that would let the French company expand in North America and add freight clients. The deal includes the sale of GE’s rail-signaling business to Alstom and agreements in services, technology, supply chain, manufacturing and commercial support. Alstom’s business making TGV high-speed trains isn’t part of GE’s planned acquisition.

“GE’s freight-signaling business is highly complementary to the transit-signaling business of Alstom,” said Heymann, who rates GE, Alstom and Siemens market perform. “For the French government, it ensures Alstom can become a stronger participant in the global transit rail market.”

While the nuclear venture would also be equally owned, the French state would hold a preferred share to protect the sovereign nature of the country’s nuclear power industry. The government would have “veto and other governance rights” on matters related to nuclear technology and security, GE said.

Siemens has sought to play up its appeal with governments in France and Germany, which are keen to back the creation of stronger European companies in energy and transportation. GE has been reaching out to French political leaders since making a binding offer April 30 to acquire Alstom’s energy business, which makes turbines and power transmission equipment.

“We have reached agreements with Alstom’s management that will create an alliance between our companies in both spirit and practice,” Immelt said in a GE statement. “The alliance will retain and strengthen France’s presence in the energy business and reinforce Alstom Transport.”

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