Paris Slams Brakes on GE Plans for Alstom Unit
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.