DealBook: G.E. Alters 1ts Alstom Bid in Effort to Win French Support

Stephane Mahe/ReutersAn Alstom offshore wind turbine in Le Carnet, France. G.E. is proposing a structure that keeps some energy assets under an Alstom roof.

Updated, 1:35 p.m. |
PARIS – General Electric announced on Thursday a revised $13.5 billion bid for the energy business of the French conglomerate Alstom aimed at easing concerns of the Socialist government of President François Hollande.

Instead of a straightforward takeover of Alstom's energy assets, largely power generation and grid equipment, G.E. is now proposing a structure that keeps some of those assets under an Alstom roof.

G.E. is not altering the financial valuation of the deal, and under the revised proposal, General Electric would still get Alstom's prized gas turbine business and its existing customer base.

But G.E. said it would take steps to maintain France's presence in the energy business. In one change to the offer, G.E. is now proposing to create two joint ventures with Alstom: one in the power grid business and another in renewable energy.

Investors initially seemed skeptical of the success of the revised offer. Alstom's shares closed down 6 percent in trading in Paris.

Jeffrey R. Immelt, General Electric's chairman and chief executive, has been seeking to win over the French government and derail a rival bid made earlier this week by Siemens and Mitsubishi Heavy Industries.

Mr. Immelt, who has been working for nearly two months to bring skeptical French officials around, met with Economy Minister Arnaud Montebourg and representatives of Alstom's unions on Thursday. He is scheduled to meet with President Hollande on Friday.

Christian Hartmann/ReutersJeffrey R. Immelt, General Electric's chairman and chief executive, at the Elysee Palace in Paris last month.

"The alliance will retain and strengthen France's presence in the energy business and reinforce Alstom Transport," Mr. Immelt said in a statement. "It creates jobs, establishes headquarters decision-making in France and ensures that the Alstom name will endure."

General Electric is also conceding on a major government demand by offering to sell its rail signaling business to Alstom for an undisclosed price. It said it would also form a tie-up with Alstom in North America, where G.E. has strong rail freight operations, "complementing Alstom's worldwide positions notably in passenger transportation."

Addressing another of the government's main concerns, assuring France's nuclear energy security, G.E. would create a structure to house the combined companies' nuclear and steam turbine business in a global alliance. And it proposed creating a special French government-owned company to house the intellectual property behind Alstom's advanced Arabelle nuclear steam turbines, leaving to the state the final say over their licensing.

G.E. had set a deadline of June 23 for its offer to be accepted by the Alstom board. Asked at a briefing if G.E. was prepared to walk away if no agreement was reached before the deadline, Mr. Immelt replied, "Yes, the deadline stands."

G.E.'s original plan was backed by the Alstom chairman and chief executive, Patrick Kron, and the Bouygues family, the largest shareholder in the French company.

Alstom's board will now have to decide whether to accept the revised proposal. Christine Rahard-Burnat, a spokeswoman for Alstom, said she had no information on the board's plans and declined to comment further.

Mr. Immelt told journalists at the briefing that, while the new structure was less elegant than the original plan, "The heart of why we started this and where we are is intact."

"I think it's clearly in within our ability to manage and make it run," he added.

Siemens did not respond to requests for comment, but Christophe de Maistre, head of the company's French business, told Agence France-Presse that he remained very confident even after G.E.'s revised offer. A Mitsubishi Heavy spokesman declined to comment.

Mr. Immelt said that the meetings with union delegates had been "productive," but that the reaction was cooler from some workers' representatives.

Charles Menet, a delegate from the Force Ouvrière union for Alstom Transport, expressed strong opposition to both the G.E. and Siemens-Mitsubishi Heavy offers. "We still believe that the government should take over the group, more than 50 percent, whether that's called nationalization or taking control," Mr. Menet said.

"These are strategic industries, energy and transport," Mr. Menet said. "We shouldn't be at the mercy of financial speculators."

Under the original offer, G.E. had imagined simply absorbing Alstom's energy business, which contributes more than two-thirds of its revenue. It would have left Alstom's transport unit — which makes high-speed TGV trains, metro systems and rail infrastructure — as a stand-alone listed company bearing the Alstom name. But that proposal met with fierce opposition in the government, which feared having a French industrial prize, along with its nuclear technology, fall into foreign hands.

Ian Langsdon/European Pressphoto AgencyShunichi Miyanaga, chief of Mitsubishi Heavy, and Joe Kaeser, chief of Siemens, in Paris.

Siemens and Mitsubishi Heavy, encouraged by Mr. Montebourg, made their own proposal on Monday: an offer of 7 billion euros, or $9.5 billion, that would see Siemens take the French company's gas turbine business and Mitsubishi invest in a range of Alstom units. That offer left a number of questions unanswered, and its complexity had raised doubts among some analysts. The government has called on both camps to improve their offers, but Joe Kaeser, the Siemens chief executive, has shown little interest in doing so.

Siemens argues that its offer actually values Alstom's energy business higher than G.E.'s bid does. Mr. Immelt said at the briefing that the creation of the joint ventures and the sale of the rail-signaling business to Alstom would reduce the size of G.E.'s offer, but that he believed it would still have a higher cash component than its rivals'.

G.E. has also agreed to create 1,000 new French jobs over the next three years, "in high-value areas such as manufacturing and engineering," and it proposed a strict system for monitoring its performance with "financial penalties if the goal is not achieved."

The American company has also agreed to base several of its global headquarters in France, in the areas of electrical grid, offshore wind, hydroelectric power and steam turbines. G.E.'s European power business headquarters are already in Belfort, France.

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