GE had presented an improved offer for Alstom's energy business to the French government Thursday.
By Geoffrey Smith
June 20, 2014

The race for French engineering giant Alstom SA (AOMFF) heated up as it went into its final stages Friday.

Germany’s Siemens AG (SIEGY) and Japan’s Mitsubishi Heavy Industries Ltd (MHVYF) said Friday they had raised their joint bid for the French company’s energy assets, putting another €1.2 billion in cash on the table in an effort to convince both the Alstom board and the French government.

The new joint offer comes a day after General Electric Co  (GE) bowed to French political pressure and revamped its rival approach for Alstom, rowing back from its original $17 billion plan for an outright purchase of the energy business. Instead it proposed two 50/50 joint ventures–both based in France–for renewable energy and grid technologies.

GE also suggested a 50/50 ‘alliance’ on steam turbines for nuclear power stations, offering the French government would have a veto and “other governance rights”, including the rights to market Alstom’s latest “Arabelle” turbine technology if GE doesn’t want to use it.

GE guaranteed 1,000 new high-value jobs in France over the next three years as part of its offer, which chief executive Jeff Immelt will discuss later Friday with French President Francois Hollande.

Siemens and Mitsubishi countered by simplifying the structure of their bid, with Mitsubishi proposing to take a 40% stake in a single company covering Alstom’s steam and hydro turbines and grid assets, having earlier wanted to set up separate joint ventures  for each product line.

The changes to the German-Japanese bid mean that MHI is now offering €3.9 billion in cash rather than the €3.1 billion originally offered, but the overall valuation of the assets is unchanged, because MHI had initially only wanted 20% stakes in two of the three ventures.

Siemens, meanwhile, raised its offer for Alstom’s gas turbine business by €400 million to €4.3 billion.

Alstom’s board had approved GE’s original offer, but the French government was unwilling to let a company it considers strategically important fall entirely into foreign hands.

Alstom’s management had wanted to get out of the energy business and focus on rail technology, where it believes the company can be a global leader. With that in mind, Siemens said Friday it would immediately offer a joint venture with Alstom on rail signalling, but still held back from offering to combine its own locomotive and rolling stock operations with the French company’s. GE Thursday had said Thursday it would sell its signalling business to Alstom and would form a global alliance with it in transportation.

Alstom’s board has to announce which bid it prefers by Monday, when the GE bid expires.


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