Germany’s Siemens AG said on Tuesday that it would make an offer to French engineering group Alstom SA if it is given four weeks to examine its books and draw up a detailed plan to rival a move by General Electric Co.
Siemens said it had sent a letter to Alstom in the afternoon after its managing and supervisory boards had decided to make an offer. Sources say Alstom already has a $13-billion (U.S.) cash offer from GE for its power business, which generates 70 per cent of its sales.
The interest in Alstom from U.S. competitor GE has triggered a fierce national debate about the fate of power turbine and train manufacturing in France – both integral to the nation’s engineering pedigree.
“The prerequisite for this offer is that Alstom agrees to give Siemens access to the company’s data room and permission to interview the management during a period of four weeks, to enable Siemens to carry out a suitable due diligence,” Siemens said.
It gave no further details of its plans, but at the weekend Siemens approached Alstom with a proposal to exchange part of its train business plus cash for Alstom’s power arm. In a short letter, it had outlined its proposal worth $14.5-billion.
A source close to the discussions said a board meeting at Alstom had started early on Tuesday evening. The company made no comment but is expected to give details on the two bids before the market opens for trading at 9 a.m. Paris time on Wednesday.
Trade in Alstom shares was suspended on Friday after Alstom shares jumped 10.9 per cent on Thursday following media reports about GE’s interest.
French financial markets regulator AMF said on Tuesday that it wanted Alstom share trading to resume on Wednesday after the market has been informed about the content and modalities of two bids for the firm.
The regulator also said Alstom’s board had a duty to shareholders to “examine all options in an objective and professional manner and on the basis of clear criteria”.
France’s Socialist government has declared that it must have a say in the outcome, as thousands of jobs are at stake and state-owned utility EDF and the national railways are major clients of Alstom.
“There aren’t only financial interests at stake in this matter; there are also industrial, social and human interests,” Economy Minister Arnaud Montebourg said after a meeting with unions. “The government does indeed intend to defend our country’s interests.”
Alstom CEO Patrick Kron presented GE’s interest to Montebourg last week.
After Siemens’s counter-proposal emerged at the weekend, Montebourg and President François Hollande arranged meetings with the parties in Paris on Monday.
Just over a week before Siemens boss Joe Kaeser presents his future vision for the Munich-based conglomerate, investors in Siemens were skeptical about a potential deal.
“We would have preferred a less risky strategy of organic growth,” said Tim Albrecht, fund manager at DWS Investment.
A fund manager who declined to be named said: “Until last week, Alstom was seen as dead, and its products were not thought to be competitive.”
“A purchase would be a 180-degree turn. If Siemens does this, they need very good arguments to justify it strategically.”
The German government has said an Alstom-Siemens tie-up could offer “great opportunities.” Montebourg described it as creating “two European and global champions”, but Paris has not ruled out a deal with GE. Some investors may also be wary of a French-German deal, given problems with previous cross-border tie-ups, such as European defence and aerospace company EADS and drug maker Aventis, which have both been plagued by battles for control.
Industry veterans say Alstom and Siemens have very different corporate cultures and have competed aggressively against one another for decades. Relations with GE, which employs 10,000 staff in France and had French sales of €7.8-billion in 2011, are more cordial.
A tie-up between Alstom, with a market capitalisation of $11.5-billion, and Siemens, worth $144-billion, could raise antitrust questions, say some analysts.
However, some analysts and investors said they believed the Siemens move was primarily defensive.
Rob Virdee, analyst at Espirito Santo Investment Bank, said the offer looked like a move to stop GE’s expansion in Europe.
On the Frankfurt stock exchange, Siemens shares closed up 0.6 per cent, compared with a 1.5-per-cent rise in shares on the blue-chip DAX index.
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