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Would Have Created Company Worth £3 Billion

LONDON—U.K.-listed oil and gas explorer Premier Oil PMO.LN +4.21% PLC has rebuffed two recent takeover offers from its peer Ophir Energy OPHR.LN +3.97% PLC, according to people familiar with the matter, stymieing a deal that would have created a company worth £3 billion with assets in East Africa, the North Sea, Vietnam and the Falkland Islands.

Premier's most recent all-share offer for Ophir was rejected around two weeks ago, one of the people said. The first offer from Ophir came days after Premier's Chief Executive Simon Lockett said in February that he would be stepping down after nine years at the helm of the company, the people said.

A successful tie-up would have created the fifth-largest London-listed oil and gas company after BP BP.LN +0.85% PLC, Royal Dutch Shell RDSA.LN -0.27% PLC, BG Group BG.LN -0.43% PLC and Tullow Oil TLW.LN -2.50% PLC. But given that the second offer was "robust," it was unlikely there would be another bid, said one of the people familiar with the matter.

Africa-focused wildcatter Ophir Energy, headed by former Goldman Sachs banker Nick Cooper, has been seeking to acquire a company with oil production to increase its cash flow.

A merger with Premier, which produced 582,000 barrels of oil equivalent a day last year, would have been attractive for Ophir, giving it funds to spend on drilling costly deep water exploration wells and opening up new areas.

Ophir has had major exploration successes, notably a big gas find in 2012 off the coast of Tanzania—one of the oil industry's hottest new areas.

A deal could in turn have helped to shore up Premier, whose shares have fallen around 11% in the past year.

Investors once viewed Premier as a solid company with dependable production growth, but have become disappointed with the company following its 2012 entry into the technically challenging Sea Lion project in the Falkland Islands. That project will cost an estimated $5.2 billion to develop, funds some shareholders would prefer to have seen returned to them.

Edward 'Ted' Pick Refashions a Division Closely Tied to the Bank's Success

Standing before a roomful of clients in Morgan Stanley's MS -1.16% New York headquarters, Edward "Ted" Pick couldn't hold back tears.

His voice wavering, the investment bank's equities boss thanked money managers from firms such as Wellington Management Co. and Viking Global Investors during the June 2009 meeting for not abandoning Morgan Stanley even as it teetered near collapse during the financial crisis.

"The folks in this room stuck with us during the worst time in the history of this firm," he said, according to people familiar with the matter. "We're open for business."

Five years later, Morgan Stanley's success in the postcrisis era rests, in part, on how Mr. Pick and his business perform.

The equities division puts buyers and sellers together in the $60 trillion dollar global stock market, while also handling stock derivatives, big blocks of shares and hedge-fund relationships. Once overshadowed by flashier businesses at the New York bank, Mr. Pick's unit has emerged from the crisis as one of its biggest growth engines.

At a time when debt securities, currencies and commodities businesses muddle through a slump in client activity, and new regulations threaten to rein in fixed-income trading well beyond the current malaise, stock trading is taking on more importance across Wall Street.

The shift has played to Morgan Stanley's strengths and helped catapult Mr. Pick, an executive known for his fierce devotion to the firm where he has spent his entire career, into a leading role.

In the precrisis years, when fixed-income trading boomed, and for a brief stint in 2009 when demand for fixed-income products exploded after the crisis, Morgan Stanley was an also-ran to the likes of Goldman Sachs Group Inc. GS -1.62% and J.P. Morgan Chase JPM -0.87% & Co. But as debt trading subsided and the stock market began motoring, spurring a flurry of listings, Morgan Stanley's fortunes have changed.

The firm posted a 16% jump in stock-trading revenue in the first three months of the year, snatching the crown as revenue leader from Goldman for the second time in three quarters.

Morgan Stanley has repositioned itself since the crisis under Chief Executive James Gorman, moving away from riskier trading and toward steadier businesses such as wealth management and equities.

Mr. Pick, who declined to be interviewed for this article, was one of the people Mr. Gorman charged with executing that turnaround. A former capital-markets banker who spent most of his career taking clients public, the 45-year-old executive was reassigned in 2009 to lead an equities trading arm gravely wounded by the crisis.

Under the direction of his mentor, Colm Kelleher, who now heads the firm's securities business, Mr. Pick and his team remade the prime brokerage, which provides services and loans to hedge funds. They also invested heavily in electronic-trading platforms and led Morgan Stanley's traders back to the riskier corners of the business, including derivatives and block trades.

The revival, also engineered by top lieutenants such as top sales executive Richard Portogallo and head trader Sam Kellie-Smith, has put Mr. Pick's name in the mix for bigger jobs at the firm, executives said, even if no promotion is imminent. He remains very close to Mr. Kelleher, and in his former role was among the bankers who secured key capital infusions for the firm during the crisis.

Yet Mr. Pick's current mission is far from complete. Competitors such as J.P. Morgan and UBS AG UBSN.VX -1.43% also are charging hard in equities, and Goldman remains a formidable foe whose executives loathe finishing second to Morgan Stanley in anything. Morgan Stanley lags behind some of its peers, including Goldman, in derivatives and block trades.

There are also no assurances the stock-trading renaissance will continue. The debate over the role of high-frequency traders could lead to new rules that crimp profit. Stocks could fall out of favor. The market also remains at risk to technology glitches that have roiled investors in recent years.

Colleagues say Mr. Pick is up for the task. Described as passionate and intense, he is skilled at dissecting the possible outcomes of a decision and imposing his process onto those who work for him. "You better be on your game" during meetings, one colleague said. He isn't hard to read, and will destroy ill-formed arguments, the colleague said.

Five-foot-nine and trim, with light brown hair that frames a prominent brow, Mr. Pick was born in New York. At age three, he moved to Caracas, where his father ran a petrochemical business, before returning with his family five years later to live on Long Island.

In April 2009, Morgan Stanley tapped Mr. Pick to be co-head of stock sales and trading from his capital markets post.

Mr. Pick had started at the firm in 1990 as an investment-banking analyst, then returned after collecting a master's degree in business administration from Harvard. He spent most of the next 15 years in the equity capital-markets unit, which takes companies public and manages their stock sales. Mr. Pick helped manage some of the biggest stock sales of the era, including Google Inc. GOOGL -2.12% 's auction and China Construction Bank's 601939.SH +0.25% IPO.

When he took over the struggling equities division, Mr. Pick sought to shore up relationships with clients and extol the firm's virtues.

"He bleeds Morgan Stanley blue," said Roberto Mignone, a hedge-fund manager whose almost $2 billion firm, Bridger Management, continued to do business with Morgan Stanley in the wake of the crisis.

Hedge-fund clients pulled more than half their money from Morgan Stanley between October 2008 and March 2009, people familiar with the matter said.

Mr. Pick rolled out a strategy called the "nine boxes," a matrix of three businesses—trading in stocks and derivatives as well as prime brokerage—across three regions, the Americas, Europe and Asia. The goal: improve everywhere.

The firm also started its own electronic-trade order-entry system, called Passport, ahead of many of its rivals, allowing it to move some clients' trades onto a lower-cost platform, people familiar with the matter said.

"It's given them a huge advantage in the market," said Richard Prager, global head of trading and liquidity strategies at BlackRock Inc., BLK -1.04% the world's largest money manager.

By 2011, Morgan Stanley had overtaken Goldman and others to become the biggest trader of New York Stock Exchange and Nasdaq Stock Market NDAQ -0.61% -listed shares, according to an analysis of the exchanges' data by ModernIR, a data-analytics firm. That same year, Mr. Kelleher appointed Mr. Pick sole head of equities.

The unit's transformation was on full display on April 17, when Morgan Stanley reported first-quarter earnings that handily beat analysts' forecasts. During a conference call, Chief Financial Officer Ruth Porat called the prime brokerage "our gem franchise."

In a memo to senior staffers that day, Mr. Pick urged them to "be proud and be humble."

Further blow for $50bn Kashagan oil project

The $50bn Kashagan oil project in Kazakhstan is likely to be delayed by two more years while 200km of pipeline is replaced, in a further blow for the companies developing the largest oilfield outside the Middle East.

Erbolat Dossayev, Kazakhstan’s minister for economy and budget planning, told the FT that he expected production to start at the end of next year at the earliest – but that it could be delayed until 2016.

It is the first public admission by the government that the project will not only fail to produce oil this year but may not resume production until 2016. “It will be two years,” added one industry official.

It is a blow for the consortium of companies – including ExxonMobil, Royal Dutch Shell, Total, Eni and CNPC – which have invested some $50bn in the project so far in the hope that it would one day produce as much oil as Libya. Kashagan is the world’s fifth-largest field by reserves and the largest outside the Middle East, according to the US Department of Energy.

The delay is the latest in a string of setbacks for the enormous Kashagan field, which had originally been scheduled to start production in 2005 but has become emblematic of the cost overruns and delays that have plagued major energy projects, keeping oil prices elevated even as the US shale revolution lifts supplies.

The delay has also angered Kazakhstan’s government, which had been counting on the field to catapult the country into the big league of oil producers and lift government revenues substantially.

Mr Dossayev said that the delay represented a loss of 0.5 percentage points of GDP this year. He said he hoped production could be restarted late next year, so “we can put some volumes for the crude oil production in our plan in the budget”.

“But if not we will wait until 2016,” he said in an interview in Kazakhstan’s capital, Astana.

Kashagan briefly started producing oil in September last year, only to shut down a few weeks later due to a gas leak.

People familiar with the matter said that months of research had revealed numerous tiny cracks in the pipeline, as the highly corrosive sulphur-containing gas produced as a byproduct of Kashagan’s oil ate through the steel.

While a decision on how to address the problems is not likely to be taken by the consortium of oil companies until June, people familiar with the matter said that the two pipelines carrying oil and gas from an artificial island in the Caspian Sea to the shore would need to be replaced.

The companies involved have already begun to prepare for a protracted shutdown. Shell, which had been due to take over the operation phase of the project once production had started, has begun sending some expats home, one person familiar with the matter said. The arcane structure of operating companies that manages the project is also being downsized.

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That cup of morning coffee is going to cost you a few more beans very soon.

Brazil’s Arabica coffee prices have recently surged 94 percent, to $2.144 a pound on the New York futures market.

The harvest in Brazil, which accounts for more than a third of world output, will drop more than expected in the 2014-2015 season to 49 million bags “with the risk towards a lower number,” Marex Spectron said in a report last week — down from a January forecast of 55 million and last year’s crop of 53.3 million.

That decline will leave global production 7.1 million bags below demand, Marex Spectron said. That would be the biggest deficit since the 2009-2010 season, US Department of Agriculture data show.

The price spike is a result of bad weather in Brazil.

First, growers were hit with a sustained drought during the growing season brought on by El Niño tropical weather.

Then, at harvest time, flooding hampered collection of the few remaining crops.

“Nobody is absolutely sure about how big the deficit will be this year,” said Rodrigo Costa,

of Newedge Group. “The supply outlook definitely looks tighter than it seemed three months ago. The situation has deteriorated.”

Ackman’s Botox trade show wrinkles in insider-trading laws

If Michael Lewis is looking for a sequel to his best-selling “Flash Boys,” about the fairness of high-frequency trading shaving off pennies a share, he could find it this week in the actions of two “brazen men” who made billions in the canyons of Wall Street in a day by skating along the edge of conventional rules.

No fiber-optic lines required and apparently no laws gone broken. The news that hedge fund activist Bill Ackman had teamed up with pharmaceutical giant Valeant and its CEO, J. Michael Pearson , to launch a hostile takeover of Botox maker Allergan made headlines.

Along with the news came word that Ackman’s fund, Pershing Square Capital, had accumulated a 9.7 percent stake in Allergan, knowing that a bid was imminent. The Easter Monday news sent the stock soaring more than 22 percent from its previous close, a pretty nice profit when you own almost 10 percent of what is now a $50 billion company.

Was this front-running or insider trading? Ackman, no dummy, has it on good authority that it isn’t. Indeed, he hired the SEC’s former head of enforcement, Robert Khuzami — now a lawyer at Kirkland & Ellis — to specifically assure him of this. Other legal heavyweights seem to concur. It doesn’t seem to matter that the sellers of the stock and options that eventually put almost 10 percent of the company into Ackman’s hands unwittingly made a bad trade.

As Ackman tried to explain on Wednesday, “The way the rules work is you’re actually permitted to trade on inside information as long as you didn’t receive the information from someone who breached [fiduciary duty or confidentiality].

It makes one wonder why there are insider-trading laws on the books in the first place.

Yet as bold as Ackman’s Allergan antics have been, the onus is on the SEC and its chief, Mary Jo White, to clean up the murky laws. In recent months, I’ve heard several big investors and hedge-fund managers complaining loudly that the options markets have become the Wild West of inside information, with blatant action in options preceding takeover announcements. Options expert Jon Najarian noted that trading was extremely suspicious ahead of Valeant’s bid for Allergan, even if you take out the Ackman factor.

The SEC could also crack down on Ackman’s claim that his trading gains in Allergan are justified as payback in lieu of investment advice under the assumption that Valeant had to “outsource” this takeover to Ackman’s fund in order to get the deal done. If that’s the case, Ackman’s windfall should be treated as ordinary income by the IRS, not an investment gain, shouldn’t it?

All in all, I have to hand it to Ackman for a brilliant move. But while his stealth moves enrich him and his investors, they slowly undermine investor confidence. What better time than a run on the company that famously removes wrinkles to take the wrinkles out of our insider-trading laws?

Apple prepares for $17bn jumbo bond sale

Apple is preparing the groundwork for another blockbuster debt sale in the region of $17bn that could rank as the second-largest corporate bond sale of all time.

The world’s most valuable company said last week that it planned to increase its share buyback from $60bn to $90bn, funded by domestic and international bond sales.

Apple plans to use proceeds from the debt sale to fund the buyback rather than tap its $150bn cash pile. About $130bn of that cash is held overseas, 88 per cent of the total, and returning it to the US would lead to a tax charge of up to 35 per cent.

A foreign debt sale would probably target the eurozone, where interest rates are lower than in the US, and diversify Apple’s debt investor base.

During Apple’s quarterly results call last week, Luca Maestri, Apple’s incoming finance chief, warned that repatriating offshore cash would incur “significant” tax consequences.

Mr Maestri, who joined Apple after stints at General Motors, Nokia Siemens Networks and Xerox, said the breakdown of markets and currencies for its debt sale would be decided later in the year.

Apple was likely to raise “an amount of term debt financing similar to what we issued in 2013”, he said, adding that preparations had also been made to tap the commercial paper market for short-term liquidity.

Apple sold bonds worth $17bn 12 months ago, which was the world’s largest corporate debt sale at the time, with demand for the offering topping $50bn. But that jumbo sale was eclipsed five months later when Verizon, the US telecoms company, sold $49bn worth of bonds to help finance its $130bn acquisition of the 45 per cent stake in Verizon Wireless it did not already own.

Apple’s domestic cash has run down from $39bn to $38bn since it paid its first dividend in August 2012 and Mr Maestri said he wanted to retain “sufficient domestic liquidity to grow the business and execute capital expenditures and acquisitions”.

Tim Cook, chief executive, said Apple was “on the prowl” for more acquisitions, after buying 24 companies in the past 18 months and he was not averse to large acquisitions.

The company has come under pressure to return more cash to shareholders by activists. Given its strong balance sheet and its double A credit rating, Apple is able to issue huge amounts of debt.

But analysts say the company needs to be wary of saturating the US debt market after last year’s bond sale, hence its examination of foreign markets.

An Apple bond issue will likely be greeted with open arms by the investment community

- Jack Ablin, chief investment officer, Harris Private Bank

The combination of Apple’s high credit quality and the likelihood of longer-dated tranches being included in the offer, are likely to appeal to pension funds and insurers, analysts said.

Jack Ablin, chief investment officer at Harris Private Bank, said that the new bonds would probably offer a higher yield than government bonds.

“An Apple bond issue will likely be greeted with open arms by the investment community,” he said.

Investors who bought Apple’s bonds last year are sitting on substantial price losses as the iPhone maker issued its debt just before long-term interest rates rose sharply last summer.

“Apple came at the very top of the market,” said Sabur Moini at Payden & Rygel. “That was great for the company, but not so much for the investors.”

European banks quadruple equity raising

European banks have more than quadrupled their equity raising as they seek to fortify their balance sheets with extra capital ahead of crucial stress tests by European regulators later this year.

The continent’s banks have raised €6.5bn in equity for the year to date compared with €1.6bn over the same period in 2013, according to Dealogic, the data provider.

However, Morgan Stanley estimates the true amount of capital raised – including proceeds from initial public offerings and divestments – to be €35bn since last July when banks began to factor in the European Central Bank’s looming assessment of balance sheets.

“The costs for raising capital have come down – so banks are taking it on the chin,” said Huw van Steenis, banking analyst at Morgan Stanley. “The ECB’s asset quality review is proving more cathartic than the market feared, prompting banks to raise capital, take more provisions and help restore confidence.”

Last week, it was revealed that Deutsche Bank is facing pressure from investors to raise more capital amid fears that the bank is not sufficiently robust to cope with a tougher regulatory environment and a slump in global debt markets.

Officials including Mario Draghi, the ECB president, and Danièle Nouy, the euro area’s chief banking regulator, have warned that some banks may have to fail the health checks.

As such banks have been scrambling to pre-empt the ECB’s AQR and stress tests by strengthening their finances now, rather than risk being ordered to do so once the regulatory health check is over.

“Banks will try to get ahead of the AQR/stress tests and take clean-up charges now,” said Mr van Steenis. “No one wants to be caught out later.”

The most vigorous raisers have been concentrated in the eurozone. Italian banks have been the most prolific capital raisers accounting for €10.2bn, or a third, of total capital raised by eurozone banks, according to the Morgan Stanley figures.

Meanwhile, Greek banks have raised €8.8bn, Spanish banks €6.1bn and Austrian banks €3.4bn since last July.

European banks will be required to hold at least 8 per cent of regulatory capital in the stress tests – mostly consisting of shares and retained earnings – to their risk-weighted assets under transitional Basel III rules.

Banks are awaiting publication of the parameters of stress tests that will be imposed on banks across Europe.

The announcement by regulators, including the European Banking Authority, will help investors judge which banks may have black holes in their balance sheets.

Thwarted Immelt heads back to France

In the autumn of 2009 Jeff Immelt, chief executive of General Electric, flew to Paris twice in an attempt to secure government support for a bid for Areva’s power grid equipment business.

He failed. President Nicolas Sarkozy favoured a French solution, with the business shared out between Schneider Electric and Alstom.

Four years later Mr Immelt is trying to negotiate a bid worth about €10bn for Alstom’s power businesses, including the ex-Areva transmission equipment that he failed to buy in 2009.

His motivation is more than just wounded pride. Presenting the group’s first-quarter results earlier this month, Mr Immelt said he would be prepared to make an acquisition for more than $4bn if it offered excellent value and the potential for strong synergies with GE’s businesses. The Alstom deal has both.

Since it helped outmanoeuvre GE four years ago, Alstom has been buffeted by the fall in investment in power generation in Europe. Its shares have dropped 45 per cent since the end of 2009, and it is exploring a variety of ways to raise cash.

As a result, its energy businesses are available for an attractive-looking price. If GE ends up paying €10bn, that would be about seven times earnings before interest, tax, depreciation and amortisation, giving an immediate boost to GE’s earnings per share.

Shannon O’Callaghan, an analyst at Nomura, argues that ought to ease any investor concerns about the size of the deal.

“If Jeff Immelt had gone and bought something grotty for 15 times ebitda, people would have killed him for it,” Mr O’Callaghan says.

“But GE has cash and can take a longer view, and can do something with the business, so it’s an easier case to make.”

The fit between GE’s and Alstom’s businesses is excellent: GE is stronger in gas turbines for power generation while Alstom is stronger in coal power and grid equipment. Strengthening its coal power business would be a change of course for GE, which has been stressing its commitment to gas, but would hedge that position by allowing it to benefit from continued growth in coal use in emerging economies.

The most attractive part of the Alstom energy operations, though, is probably the service business looking after power plants, which accounts for about a quarter of its sales. Alstom has the world’s second-largest installed base of plants with about 900 Gigawatts of capacity, behind only GE.

Nigel Coe of Morgan Stanley says: “That’s a huge installed base of service revenue, and there will be synergies from putting its business together with GE’s.”

Alstom’s profitability certainly seems to offer room for improvement. The average operating margin in its energy businesses is 8.6 per cent, compared to 15.7 per cent for GE’s industrial operations last year. European labour laws, and possibly assurances made to the French government to buy support for the deal, may inhibit GE’s ability to restructure, but about 40 per cent of Alstom’s workforce – 92,900 strong at the end of last year – is based outside Europe.

GE’s size means that buying Alstom’s power businesses would not be a transformative deal. The suggested price is about 5 per cent of GE’s market capitalisation.

Nevertheless, it looks like an attractive use for GE’s excess cash. Most of the $57bn it holds in non-US subsidiaries is tied up in GE Capital, its finance arm, but Mr Coe of Morgan Stanley estimates it has about $10bn of overseas cash in its industrial businesses, which would incur a tax charge if brought into the US. With that cash plus its planned disposal proceeds of $4bn for this year, GE could fund the deal quite comfortably. It looks as though the principal obstacles will be political, rather than financial.

French Government Considers Alternative Deal with Germany's Siemens

A view of a Haliade 150 offshore wind turbine at Alstom's offshore wind site in Le Carnet, on the Loire Estuary, near Saint Nazaire, western France, on Sunday. Reuters

PARIS—The French government Sunday sought to slam the brakes on General Electric Co. GE +0.53% 's proposed purchase of Alstom's ALO.FR +10.93% energy businesses, saying it wouldn't accept any "rushed" deal over assets deemed strategic, and that it was also looking into an alternative involving German industrial conglomerate Siemens. SIE.XE -1.56%

Throwing his weight into a weekend of intense corporate negotiations, French Economy Minister Arnaud Montebourg said he had been informed about Alstom's plan to sell its energy divisions to GE, but warned the government would take the necessary time to review other solutions.

"GE and Alstom have their calendar, which is that of shareholders, but the French government has its own, which is that of economic sovereignty," Mr. Montebourg said.

The outcome carries big implications for France, which is trying to save an industrial icon that has again fallen on hard times 10 years after a government-negotiated bailout.

The tug of war over Alstom also carries high stakes for GE Chief Executive Jeff Immelt, who took a big swing at a deal that could help satisfy investors' demands for better industrial earnings, but may now end up strengthening a competitor due to political opposition.

Mr. Immelt has long targeted small deals in the $1 billion to $4 billion range, but signaled on an earnings call earlier in April that GE could do bigger deals if they were a good fit and not too expensive. His predecessor, Jack Welch, stumbled with a big deal when European antitrust regulators shot down GE's planned acquisition of aerospace rival Honeywell.

GE was already close to an agreement when Siemens jumped in, with Mr. Immelt flying to France over the weekend in the hope of reaching a pact by early this week. But the talks ran into political trouble in France, where Mr. Montebourg said Friday his staff was pursuing alternatives to the possible deal in the hope of keeping the company in French hands.

Mr. Montebourg on Sunday wrote to Mr. Immelt to postpone a planned meeting and warn that a potential deal could face conditions from the French government.

"Any possible transaction will have to be reviewed thoroughly by the Ministry, which may impose conditions to its implementation or deny it," Mr. Montebourg wrote in the letter, seen by The Wall Street Journal.

Mr. Montebourg, an outspoken minister known for butting heads with foreign companies, was recently promoted after a government reshuffle. Last year, Yahoo Inc. dropped plans to acquire French online video site Dailymotion after Mr. Montebourg intervened.

Siemens said that it was entering the bidding race for parts of Alstom. In a letter sent to Alstom on Saturday, the German company proposed a cash deal plus asset swap to acquire Alstom's units handling thermal power, renewable power and electric-grids. Siemens valued the businesses at roughly €10 billion to €11 billion ($13.8 billion-$15.2 billion).

It also proposed to contribute significant parts of its rail systems business, which Alstom could merge with its transportation businesses. Siemens said it would guarantee jobs in France for at least three years.

An Alstom spokeswoman declined to comment.

Mr. Montebourg said the Siemens plan would result in the creation of a German-led global leader in energy equipment, and a French-led leader in trains and other transport equipment.

Siemens competes with Alstom in areas such as production of power-generation and transmission equipment as well as train manufacturing. Siemens is stronger in the power sector than Alstom but lacks its access to the French market, while Alstom is stronger in the growing market of high-speed trains.

As a globally diversified technology firm, Alstom has long been considered a strategic asset by French authorities. The French government bailed out the company a decade ago and spun off some assets that ended in foreign hands. Over the past couple of years, Alstom has been struggling amid cutbacks in capital spending by Europe's utilities, slack economic growth in the continent and weaker emerging markets.

A spokesman for GE declined to comment.

An acquisition of Alstom's energy business would give GE new power-turbine business in emerging markets and Europe, and provide entry to the transmission-equipment market, where the American company lacks a strong presence.

Bankers, meanwhile, have long talked up a swap of Siemens's train operations for Alstom's energy business, though it was feared a deal would likely face winds from politicians and labor unions concerned about job cuts.

Last year, Siemens bought rail signaling operations from Invensys for approximately €2.2 billion ($3.04 billion) to bulk up its own rail-automation business and strengthen its Infrastructure and Cities unit. The unit has underperformed Siemens's other units in terms of profitability, and investors and analysts have argued it might make sense to sell the entire unit.