France to buy 20% stake in Alstom as state backs GE offer

The French government will buy a 20 per cent stake in Alstom SA, saying General Electric (GE) will only be allowed to buy the French engineering company's energy assets with the state's involvement.

"It's a prerequisite that France takes 20 per cent of the capital," French Economy Minister Arnaud Montebourg said in Paris on Friday. "If that's not realised, GE's bid will be blocked."

The move may end a takeover battle between GE and Siemens for Alstom's energy assets. Both GE Chief Executive Officer Jeffrey Immelt and Siemens CEO Joe Kaeser met several times with government officials who have pushed for more guarantees on jobs and the country's energy independence since GE unveiled its bid on April 30. Among concessions the US company has made is the addition of 1,000 local industrial jobs.

"The state has succeeded in keeping Alstom French," Montebourg said on Friday. GE declined comment on whether it will accept France's demands.

While the US company seeks its biggest purchase yet to expand in Europe, Munich-based Siemens wants to avoid its main competitor bulking up in its own backyard.

Earlier on Friday, Siemens and its partners improved their offer for Alstom, valuing the French company's energy assets at euro 14.6 billion ($19.9 billion).

Siemens and Mitsubishi Heavy Industries Ltd lifted the cash component by euro 1.2 billion to euro 8.2 billion, they said in a statement. While Siemens offered euro 4.3 billion for gas turbines, Mitsubishi Heavy would pay euro 3.9 billion for stakes in steam-turbine, power-grid and hydro units, the statement said. GE had responded by issuing a statement its cash component is still higher, without giving a precise figure.

As part of the new proposal, Siemens increased the valuation of Alstom's energy assets by euro 400 million to euro 14.6 billion.

GE had on Thursday refined its bid for Alstom's energy assets by adding alliances in nuclear technology and rail. The cash element of its original offer, that values Alstom's energy assets at euro 12.35 billion, will be pared, Immelt had said in Paris on Thursday, without giving a figure.

"The cash we will provide to Alstom is higher than the competitive bid even with the increase they announced this morning," GE said earlier on Friday. "In addition, the competitive bid is not binding and is unrealistic because it splits Alstom's gas and steam businesses."

The US company said it would sell its rail-signalling operations to Alstom, which in turn will keep a stake in joint ventures being formed in power grids, steam turbines and renewables. GE and France's Alstom also will create a nuclear- energy partnership to appease French concerns about the the sovereignty of the country's nuclear power industry.