It was at a glitzy state dinner in Washington in early February that stylish Clara Gaymard, a veteran Paris insider and head of General Electric in France, pulled French industry minister Arnaud Montebourg aside for a quick chat.
She mentioned that GE may be interested in buying Alstom’s energy business, a move that would be its biggest ever acquisition, giving the US conglomerate a much stronger position in the European turbine market and control over a French “industrial jewel”.
Ms Gaymard knew it was a good idea to keep Mr Montebourg partly in the loop. The firebrand Socialist had a history of blowing up if handled badly, most famously when he threatened to nationalise some French steel operations of ArcelorMittal in 2012 when they were slated for closure.
“I asked if that would be a problem, and he said no,” said Ms Gaymard, who is a novelist and also of the few women at the upper echelons of French business. This would turn out to be a grave miscommunication.
Four months later it would be Mr Montebourg who would put the brakes on the GE bid for Alstom. He would also encourage Siemens and Mitsubishi Heavy Industries to make a rival offer, the details of which were announced on Monday.
A few weeks before the dinner, Patrick Kron, chief executive of Alstom, had published a dismal set of quarterly results, with the turbine business, which is three quarters of group revenues, weighed down by overcapacity in Europe.
He started putting the feelers out for a possible buyer. At the start of February he hosted both Joe Kaeser, the chief executive of rival Siemens, and Jeffrey Immelt, GE’s chief, for two separate dinners in Paris.
Mr Kron came away from the dinner with Mr Immelt thinking that some kind of deal could be worked out, according to people close to the talks, but that a deal with Siemens was going to be both impossible and undesirable.
The tone of the conversation with Mr Kaeser was terse, and Siemens later complained of the uncooperative attitude of Mr Kron, who has a reputation for directness. Mr Kron had made his choice.
Siemens and Alstom have a troubled history. Not only are they fierce rivals, but in 2004 Alstom suspected that the German engineering group battled to block its state-backed bailout in an attempt to force its break-up.
What followed the dinner was two months of negotiations between a small team at GE and another small team at Alstom, with Mr Kron keeping the talks secret from the board of directors and the government.
Mr Montebourg was aware that something might be afoot and repeatedly tried to press Mr Kron about what was happening, but as the deal was still in a preliminary phase Mr Kron felt no need to say anything.
On April 23, more than two months after the dinner with Mr Immelt, Mr Kron and his team were at the Peninsula Hotel in Chicago finalising the deal. The plan was to announce the deal a few days later, after informing the government and other stakeholders. But just hours later, as the close-knit team was extended to include lawyers and PR professionals, the story leaked on Bloomberg.
Mr Kron, son of Polish-Jewish immigrants from Nazi Germany and a product of elite French engineering school École Nationale Supérieure des Mines, called the resulting explosion a “foutu le bordel”, politely translated as a “hell of a mess”.
A livid Mr Montebourg was informed the next morning, and summoned Mr Kron back from the US. Mr Kron went straight from Le Bourget private airport in the north of Paris to the finance ministry office in Bercy by the river Seine.
Mr Montebourg said he felt “betrayed” by the way Mr Kron was trying to sell a division employing 9,000 workers in France behind his back, attacking him for a “breach of national ethics”.
“Does the economy minister have to install lie detectors in his office because the CEO of a CAC 40 company isn’t public spirited enough to alert the government?” said Mr Montebourg later that week during a debate in parliament.
Mr Montebourg refused to let the deal go ahead. The Alstom board accepted the offer as planned, but the board had to leave the door open for a rival bid. The Alstom board has until June 23 to make a final decision.
The government had a few weeks. Behind the scenes they scrambled to find bidders who could rival the GE offer. They attempted to find an all-French solution, but to no avail, eventually encouraging Siemens to bid.
Mr Kaeser was on a trip to Washington when he heard the news. He hurried home to Germany, convened Siemens’ board and dispatched a two-page letter to Mr Kron in order to buy Siemens some time and secure access to Alstom’s books.
In the letter he floated the idea of an asset swap, taking Alstom’s energy business and in return handing over Siemens’ rail operations, creating two “European champions”, an idea Mr Montebourg publicly lauded.
But Alstom’s management was not impressed, saying privately it did not want the rail operations, and refusing to even look at the division’s books. It also feared that combining the directly competing energy operations would prompt competition concerns and significant job losses.
At the same time many of Siemens’ large shareholders were advising management to leave Alstom well alone and focus instead on an internal reorganisation designed to boost profit margins and help it better compete with GE.
But Mr Kaeser, an experienced dealmaker, was determined to show arch rival GE that despite Siemens’ internal restructuring it was still capable of taking action. He also wanted to prevent GE taking over such a large business in Europe.
Siemens went back to the drawing board, and came up on Monday with a different deal, designed to quash competition concerns, minimise its own investment and appease the government through the use of joint ventures.
They brought in Mitsubishi of Japan, which had expressed some interest in April to the government and which was already in close contact with Siemens over a separate joint venture in the metallurgical industry which was finalised last month.
Siemens is offering €3.9bn for Alstom’s gas turbines business while Japan’s Mitsubishi Heavy and partner Hitachi would pay €3.1bn and merge their operations with Alstom in three other energy areas.
The new offer is far more complex than GE’s, which is just a straight $16.9bn purchase of the energy assets. Siemens knows it has an uphill struggle to convince the Alstom board, as well as the government, which has expressed concern at any deal that would break Alstom apart.
But Siemens says it is confident it can win over hearts and minds this week, and that its last-minute rearguard action can prevail over GE’s simpler offer, which was so nearly a done deal before Mr Montebourg took against it two months ago.
“The Americans always come in guns blazing, it is always the same,” said one person close to Siemens. “We have gone for a more subtle, a more complex and more consensus-driven approach.”