Even the French must let foreigners buy their big companies today. Photographer: Balint Porneczi/Bloomberg

Say 'Non' to French Interference on GE's Alstom Bid

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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General Electric's Jeffrey Immelt wants to buy the energy assets of France's Alstom in what would be GE's biggest ever takeover. Some French officials, however, would prefer to contrive a European deal with Germany's Siemens. So will suspicion of les Americains triumph?

It hasn't helped GE's case that Immelt seems to have forgotten to first consult the French government on his bid, but in the end, it won't matter. The days of national champions are over. Globalization has put paid to the notion that domestic political posturing should be allowed to block a takeover. And while national security will still trump business logic -- and Alstom produces nuclear power plants -- the burden of proof is heavier than ever for governments trying to use that as an argument to interfere.

Hence a person familiar with today's discussions has told Bloomberg News that the government won't oppose the GE takeover -- it will seek guarantees about jobs, business locations and energy independence. The French state doesn't directly own any of Alstom, but it is the company's biggest customer.

Try this thought experiment: Suppose Siemens were to bid for GE. (Let's overlook that GE has a market value of about $267 billion, making it more than twice as big as Siemens at $115 billion.) How might the U.S. government react?

GE's sprawling portfolio includes the world's largest aircraft leasing company. It gets about 30 percent of its revenue from its financial unit, GE capital, with power and water businesses contributing a further 17 percent, and aviation delivering 15 percent. Provided a potential European raider was willing to hand over anything that was too closely aligned with the U.S. Department of Defense, you'd hope that the U.S. government would stay out of a takeover.

A study last year by Bloomberg Government showed that fewer than 10 percent of deals proposed by overseas companies are even reviewed by the Committee on Foreign Investment in the U.S., which has the power to block foreign takeovers of U.S. companies. The report explains why:

As both the world's biggest recipient of foreign investment and the largest foreign investor abroad, the U.S. is particularly dependent on free flows of investment capital. Excessive restrictions on foreign investments into the U.S. could prompt other countries to take retaliatory actions against U.S. companies exporting or making investments abroad, limiting their access to some of the world's fastest-growing economies.

That's how it should be. Consider today's other big takeover news. Pfizer, based in New York, is proposing to buy London-based AstraZeneca for almost $100 billion in what would be the U.K.'s biggest takeover. AstraZeneca makes drugs. The biggest U.K. buyer of drugs is the U.K. government, via the National Health Service. Yet the silence from U.K. politicians is deafening.

"I don't think that the government will try to block the deal," Laurence Parisot, honorary president of the French employers' union Medef, told Bloomberg Television about the Alstom transaction today. "It just wants to show French public opinion that it's paying attention."

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Mark Gilbert at magilbert@bloomberg.net

To contact the editor on this story:
Marc Champion at mchampion7@bloomberg.net