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France meets Alstom bidders with pledge to protect jobs Germany voices support for Siemens–Alstom deal

Updates with Siemens latest statement, details of potential Siemens proposal                      — Editor

By Natalie Huet and Benjamin Mallet

France said it would defend jobs and its national interest as it met suitors eyeing a breakup of engineering group Alstom on Monday and suggested it preferred Germany’s Siemens over US giant General Electric. President Francois Hollande held talks with GE boss Jeff Immelt on Monday morning and was due to sit down later in the afternoon with Siemens CEO Joe Kaeser to discuss the fate of Alstom, the maker of the country’s prestigious TGV high-speed trains and turbines for power plants. “We won’t let Alstom sell this national champion behind the back of its shareholders, its employees and the French government,” Economy Minister Arnaud Montebourg wrote on his official Twitter account before the meetings started, accusing Alstom’s CEO Patrick Kron of “a breach of national ethics”.

Alstom, which is suffering from big debts and falling demand, was bailed out by the French government in 2004 but now needs help again. Smaller than its rivals, it was hit the hardest by a slump in orders for power equipment since the 2008 economic downturn depressed electricity prices. Monday’s meetings follow a weekend of drama when Alstom’s German rival Siemens proposed a swap of power and rail assets to counter a potential Alstom-GE energy tie-up. Montebourg said the Siemens plan would create “two European and global champions.” Berlin weighed in on Monday morning, saying an Alstom-Siemens deal could offer “great opportunities” for Franco-German cooperation. Siemens also re-confirmed its interest in an Alstom deal.

After GE CEO Immelt emerged from talks at the presidential palace late on Monday morning the company issued a statement saying: “The dialogue was open, friendly and productive.” It added: “It was important to hear in person President Hollande’s perspective and to discuss our plans ... We understand and value his perspective, and we are committed to work together.” Hollande and Montebourg have said their concerns are related to jobs, the nation’s energy independence, and the location of activities both in power and rail. A source familiar with the discussions said GE had offered some solutions to these concerns but that there was still a lot of work to do.

Montebourg said before the meeting with GE that France would oppose any deal it considered unsuitable. But the minister — who has threatened in the past to nationalise assets belonging to steelmaker ArcelorMittal — stopped short of suggesting the state would do the same for Alstom. “It’s too early to raise that question,” he said. Hollande is due to meet Siemens’ Kaeser in the evening, at 1600 GMT, then at 1715 GMT hold talks with Martin Bouygues, the billionaire chairman of family conglomerate Bouygues that is Alstom’s largest shareholder with a 29.4 percent stake. Immelt arrived in Paris during the weekend, aiming to hammer out a $13 billion deal to buy Alstom’s power turbines business. News of talks between the two surfaced last week and sources with knowledge of them say they have been going on for months and are very advanced.

However Siemens may also be working on refining its proposal, a second source with knowledge of the talks said. “It is clear that Siemens wants to remain in the race. They could come back with a more binding offer or with another, more detailed letter addressing some of the issues pointed out in the press, such as antitrust and jobs.” Analysts see sense in an Alstom-GE tie-up. GE is relatively weak in turbines for nuclear and coal power generation, where Alstom is strong, and the French group’s established base of power installations generated 70 percent of its global revenue in the last year. A deal would also enable GE to expand into offshore wind power and grid technology. Such a beefed-up GE would be a tough competitor for Siemens — hence its counter-attack, say industry sources. Citi analysts estimate that combined with Alstom, Siemens could have 50 percent of the world’s installed power capacity, well ahead of GE, which currently has around 25-28 percent.

Germany’s Siemens, like Alstom, makes high-speed trains and other rolling stock as well as power station turbines, and according to sources familiar with its plan is proposing an asset swap that would make Alstom a more significant rail transport player while enhancing its own turbines and power grid equipment business, Its proposal also offers Alstom some cash, and puts an enterprise value of around 10 to 11 billion euros ($14-$15 billion) on Alstom’s power arm. However, industry sources and analysts say that a deal with Siemens — an option floated a decade ago but rejected by both Alstom’s CEO Kron and then-president Nicolas Sarkozy — could bring more overlap and antitrust issues than a deal with GE.

Alstom’s unions warned a Siemens tie-up implied big layoffs at both companies due to heavy overlap. Alstom employs 18,000 people in France, about 20 percent of its total workforce, against GE’s 10,000 French workers and Siemens’ 7,000. “Why not a Franco-French solution? Can’t the French state intervene directly by partly taking over the stake Bouygues holds?” Alstom’s moderate CFE-CGC union said in a statement. Labour Minister Francois Rebsamen, asked if nationalisation remained an option, told France Inter radio: “I think nothing is out of the question at the moment.” GE has declined to comment apart from Monday’s brief statement. So has Bouygues, only saying it supports Alstom’s strategy. Siemens said on Sunday it had written to Alstom about strategic opportunities and in Monday’s statement said that after the meeting with Hollande it would “convene as soon as possible to decide whether to make an offer for Alstom and what this will consist of.”

Siemens has hired Societe Generale and BNP Paribas to help it on a possible deal swap with Alstom, according to sources with knowledge of the situation who declined to be named because the talks are private. (RTRS) Rothschild and Bank of America Merrill Lynch are advising Alstom on the deal while GE is working with Lazard and Credit Suisse, the sources said. BNP and Societe Generale declined to comment; the other banks were not immediately available for comment. Alstom’s shares are suspended from trading until Wednesday while it considers its options. Alstom shares, which had slumped earlier this month to a near nine-year low, jumped at the end of last week to reach their highest in five months. Meanwhile, the German government voiced support on Monday for a deal between Siemens and France’s Alstom, saying mooted plans for a swap of energy and rail assets could offer “great opportunities” for both countries.

The German engineering group, which missed out on acquiring Alstom assets a decade ago due to opposition from the French government, is reportedly ready to offer the French firm half of its train-making business plus cash in exchange for Alstom’s power turbines division. “A possible partial takeover offers great opportunities and has great potential for both Germany and France from an industrial policy point of view,” a spokesman for the German economy ministry said on Monday when asked about a possible deal between Siemens and Alstom. “We believe it makes sense to strive for cooperation with France in the energy area.”

Economy Minister Sigmar Gabriel was in close contact with all parties, and keeping Chancellor Angela Merkel informed about how talks were progressing, the spokesman added, declining to say whether France had requested intervention from Germany. Separately, a government source told Reuters that Siemens had informed officials in Berlin about its interest in Alstom over the weekend, and that talks had also taken place between Berlin and Paris. “From the French point of view, Siemens is the lesser of two evils,” the source said. “This shows how difficult things have become for French industry overall.” (Agencies)

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