Siemens AG is preparing a bid for Alstom SA’s energy unit that would leave it with the French company’s gas turbines while allowing partners Mitsubishi Heavy Industries Ltd. and Hitachi Ltd. to expand their steam turbines and hydro businesses, people familiar with the matter said.
Siemens would buy Alstom’s gas-turbines unit and the French company could use some of that cash for its shareholders or investments, the people said, asking not to be named as the matter is private. The offer, which could get announced as early as today, would see Mitsubishi Heavy, Hitachi and Alstom merge their steam turbines and hydro assets, with the Japanese companies taking a minority stake in the venture, they said.
A bid by Siemens, Mitsubishi Heavy and Hitachi may increase pressure on General Electric Co. to improve its existing $17billion offer for Alstom’s energy assets. Each side has competed for the backing of the government, which aims to preserve French interests regarding jobs, research centers, and turbines for nuclear plants.
“We’re not finished with improvements, on both sides,” French Finance Minister Michel Sapin said yesterday. Siemens’s offer becomes more attractive with Mitsubishi Heavy participating, he said.
The deal also has the potential to create a European transport group with Siemens and Alstom combining their rail assets, the people familiar with the deal said. The board of Munich-based Siemens was scheduled to meet yesterday and approve the plan, they said.
Siemens gained 0.2% in Frankfurt trading as of 9.33am, while Alstom rose 0.3% in Paris.
Under the proposed German offer, the French government and Mitsubishi Heavy may buy the 29% stake in Alstom held by Bouygues SA, the people said. Mitsubishi Heavy would take a 10% stake in Alstom, another person said. Siemens may pay about EUR4billion ($5.4 billion) for Alstom’s gas turbines, Frankfurter Allgemeine Zeitung reported yesterday, without saying how it got the information.
Alstom’s initial assessment of the Siemens-Mitsubishi plan is that it’s too complex, requiring a mix of cash and assets and the creation of joint ventures and the separation of existing operations, according to two people familiar with the matter. The French company doesn’t view a separation of the gas and steam turbines business as viable, the people said.
Siemens and Mitsubishi Heavy have said they will decide by today whether to submit a joint offer to Alstom’s board of directors. A Siemens spokesman declined to comment beyond that statement. Representatives for Alstom and Mitsubishi Heavy also declined to comment.
Siemens chief executive officer Joe Kaeser is scheduled to meet Mitsubishi Heavy chief executive Shunichi Miyanaga today to finalise the terms of the offer. Both executives plan to speak at the economics affairs committee of France’s National Assembly tomorrow. GE chief executive Jeffrey Immelt made a rare appearance by a US corporate leader before the same committee in May, saying GE would protect jobs and the nation’s industrial base.
GE, based in Fairfield, Connecticut, has said it’s flexible on the terms of its bid, signaling a willingness to make concessions in negotiations with the French government.
“We have made progress in our discussions with the French government, including expanded alliances in the energy businesses with French investors as well as a global partnership with Alstom on transport,” Deirdre Latour, a spokeswoman for GE, said yesterday, declining to comment on details of the bid. “Alstom will remain a vibrant player in the energy and transportation industries.”
French Economy Minister Arnaud Montebourg presented union representatives with a plan for the government to team up with Mitsubishi Heavy to buy a stake in Alstom, Gabriel Artero, chairman of the metal-worker federation of the CFE-CGC union, said June 13.
Montebourg has said he favors Siemens’s offer because the proposal includes swapping its trainmaking business for Alstom’s energy assets to create two leading European companies in rail and energy. At the same time, Montebourg has also said GE’s bid is much improved after the company has pledged to create 1,000 new jobs in France. Alstom’s trainmaking unit isn’t part of GE’s offer.
The US company agreed last month to a French government request to extend the deadline for consideration of the Alstom offer to June 23. French officials asked for the three-week delay while seeking better terms for an acquisition.
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