GE had presented an improved offer for Alstom's energy business to the French government Thursday.
ERIC PIERMONT/AFP—Getty Images

Joint move potentially stymies a bid from the U.S.’s General Electric.

By Geoffrey Smith
June 16, 2014

The engineering giants of Germany and Japan have finally presented their long-awaited proposals for the power business of France’s Alstom SA AOMFF , potentially stymying a bid from the U.S.’s General Electric  GE

Siemens AG and Mitsubishi Heavy Industries Ltd said in a joint statement that the German company would buy all of Alstom’s gas turbine business for €3.9 billion ($5.3 billion) in cash, while Mitsubishi would pay a total of €3.1 billion in return for minority stakes in the French company’s steam, nuclear, hydro and transmission businesses.

Siemens said it would also look at ways in which to create a European champion in the rail business. That falls well short of an outright commitment to use its own transportation business, which makes high-speed trains and rolling stock, to buy the Alstom assets, but at least some of the total €7 billion in cash that Alstom would receive could theoretically find its way back to the German company as part of any subsequent transportation deal.

The joint German-Japanese bid comes after the French government reacted coldly to Alstom’s agreement to sell its power business to GE for $12.35 billion. Afraid of seeing a French national champion fall into the clutches of a U.S. Company, Government ministers have actively lobbied Siemens to make a counter-offer that would preserve French jobs and create a European-based “champion.” The government has also hastily issued a decree extending its powers to veto the takeover of assets it considers of “strategic interest.”

At the government’s urging, GE has already sweetened its offer to guarantee more jobs in France, where the unemployment rate was over 10% in April. For their part, Siemens and MHI said Monday they would create 1,000 new jobs there. Siemens also offered a three-year job guarantee in France and Germany for the businesses involved.

Alstom, maker of France’s iconic high-speed trains, has said it wants to concentrate more on its transportation business in future, which it sees as offering better returns than an electricity business in which it lacks global scale. Under the Siemens/Mitsubishi offer, Alstom would remain a player in the energy business. MHI’s part of the deal only envisages it taking a 40% stake in Alstom’s steam and nuclear business and a 20% in its grid and hydro businesses, respectively.

In addition, Mitsubishi said it would “contemplate” buying up to a 10% stake in Alstom from the French conglomerate Bouygues SA. Bouygues currently holds 29% of the company and was reported by Bloomberg to support the GE bid.

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