Months ago, the French government rejected General Electric’s (GE) original offer for Alstom’s (ALO.PA) energy assets. But fortunately for GE, ALO was open to a deal that would combine both companies’ rail businesses. So, GE’s Chairman and CEO, Jeffrey Immelt, went directly to the French government with an enticing promise that, over the next three years, GE would create 1,000 jobs at the French train and turbine maker. GE knows just how to reel them in…
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But not so fast, apparently… GE isn’t the only shark in the water looking to capture ALO…
Just a couple of weeks ago, Siemens (SIE.DE), its German rival, was trying to win Alstom over, too. It had yet to go in for the kill by offering a bid, but it was still circling around Alstom pretty closely, showing strong interest.
Well, that’s old news…
Since then, GE has upped the ante, improving its bid, once more – adding two 50-50 joint ventures in grid and renewables, and a global nuclear and steam alliance…
GE is staying very close to Alstom, especially now that Siemens and Japan’s Mitsubishi Heavy Industries (MHVYF) have placed a bid on the sought-after Alstom.
But, looking at the baseline, the two offers are entirely different…
Is There Really Any Competition?
You see, GE is after 70% of Alstom’s business – its power arm. Meanwhile, SIE is interested in the gas turbines operation, with MHI taking minority stakes in power activities.
So, technically, they’re not all motivated by the same things, and apparently politics are playing a big role in this showdown, too.
Aligned with France’s socialist ways, its government has the power to veto the offers (in an effort to project jobs). Given the circumstances, both bidders are trying to glean as much political favor as possible. So not only are they courting Alstom, but the government, too. But should Paris really put politics first?
“If France is sensible, it should worry more about what the best outcome for business is, rather than what the best political outcome can be. And that’s always the issue with most of these European countries, and, in fact, many of the developing markets I work in, political considerations seem to trump business priorities,” says Dominic Johnson, the CEO of Somerset Capital Management.
Next Monday, Alstom’s board will announce its choice. Ironically, GE’s offer expires on the same day…
The final countdown is on.
And “the chase” continues,
Commodities Research Team