French government approves $15.6 bn GE-Alstom power business deal

The French government has finally given its nod for General Electric Co's (GE) proposed acquisition of Alstom's power and grid businesses for $15.6 billion.

French economy minister Emmanuel Macron said the government would now take around 20 per cent Alstom stake from shareholder French conglomerate Bouygues SA after the closing of the GE-Alstom deal.

Bouygues, which had supported the deal from the beginning, holds around 29 per cent stake in Alstom.

When the friendly deal was tabled, the French government had in May said that it would oppose the deal since Alstom being one of the country's largest industrial conglomerates, it wanted the transaction to be reconfigured on an equal basis.

The then French economy minister Arnaud Montebourg had, in a letter written to GE's chairman and CEO Jeffrey Immelt, said, ''While it is natural that GE would be interested in Alstom's energy business, the government would like to examine with you the means of achieving a balanced partnership, rejecting a pure and simple acquisition, which would lead to Alstom's disappearing and being broken up.''

Not being a stakeholder in Alstom, the French government had no authority to stop the deal, but it could refuse to approve the transaction on national security grounds since the government was Alstom's most important customer.

France had recently blocked takeovers of local companies by American firms. In 2010, it turned down GE's proposal to buy French nuclear giant Areva's power grid equipment unit in favor of Schneider Electric.

Last year, it also blocked Yahoo's plan to buy French online video-sharing service Dailymotion from France Telecom. It did not want one of France's most successful start-ups being devoured by Americans, and instead pushed for a 50-50 joint venture.

To torpedo the GE-Alstom deal, the French government backed a part asset-swap deal from Siemens of Germany and Japan's Mitsubishi Heavy Industries, but Alstom CEO Patrick Kron rejected Siemens and opted to go ahead with GE's offer.

Siemens could not make a binding offer for all of Alstom's energy assets since it would have been rejected by the European anti-trust regulator.

Under GE's initial bid, the Connecticut-based company had offered to buy Alstom's entire power and grid businesses, which would have left Alstom with only its transport business.

The French government approved the deal only after GE revised its offer to buying not the whole of Alstom's power and grid businesses, but only Alstom's gas turbine business and its steam turbine business lying outside of France.

The remaining part of Alstom's power business and its entire grid business will be put into joint ventures, in which GE will hold 50 per cent and Alstom the remaining.

Under the new proposal, Alstom will continue to hold onto significant parts of its power and grid businesses post acquisition.

Alstom has recently been hit hard due to low demand for its new thermal power plants. The Paris-based company in 2012 announced 1,300 job-cuts in order to reduce costs by as much as €1.5 billion by April 2016 and planned to sell assets worth €3 billion to raise cash.

Alstom's energy business accounts for more than 70 per cent of the group's annual turnover of $20 billion.