The pride and the cash

Areva: The cult of the national champion can only go so far. Nicolas Sarkozy prides himself on finding nationalistic solutions to industrial problems, always ready to deploy taxpayers’ cash to keep French companies in French hands, on French soil. But the state’s position as Areva owner may force him to sanction a commercial outcome in the nuclear group’s sale of its power and distribution business.

The unit could fetch between E3.5 and E4.5 billion, according to analysts. Everything seemed to be in place for an arranged marriage in which Areva T&D, as the business is known, would pass to a duo of French industrial biggies — Alstom, the train and turbine maker, and Schneider Electric, the electrical equipment manufacturer. Alstom was forced to sell T&D to Areva six years ago to secure European Union approval for its state-funded bailout.

But this particular sale probably can't happen according to French tradition. The state owns more than 90 per cent of Areva. So it has a strong interest in extracting the best price from any deal — especially given that France has its own costly stimulus programme to pay for. Furthermore, Areva’s chief executive, Anne Lauvergeon, is a reluctant vendor. T&D accounts for almost 40 per cent of Areva’s revenue, and was among its most profitable divisions before the global downturn started taking a toll in the first half of the year. The government is forcing Lauvergeon to sell the unit as a way to pay for part of her ambitious E12 billion capex plan. But she has warned that she might forego the sale if the bids aren’t high enough.

The Alstom-Schneider consortium isn’t best placed to offer the highest price because it plans to split the company and share the spoils, thus lowering the potential synergies from a deal. In an ironic twist, Areva T&D’s unions are leaning towards either of the two other suitors, who plan to keep the unit whole — General Electric of the US, allied with buyout group CVC, and Japan’s Toshiba, which owns Arevar rival Westinghouse. If either comes up with a knockout bid, Sarko may just have to accept it.