US industrial conglomerate General Electric (GE) Co is in advanced talks to buy the global power division of struggling French engineering group Alstom SA for about US$13 billion, sources familiar with the matter said on Friday.
Sources said a deal was backed by Alstom’s main shareholder, French conglomerate Bouygues with 29 percent, and could be announced in the coming days after an Alstom board meeting on Friday afternoon. The board was due to meet again today to discuss the transaction, French daily Le Figaro said.
“Talks are going ahead swiftly, the deal’s structure is defined and everything is almost ready,” one of the sources said. “It would be a very big asset sale, enclosing the entire energy business.”
Alstom chief executive Patrick Kron confirmed to union representatives there were talks about an “industrial deal,” but did not name GE.
Alstom, Bouygues and GE declined to comment.
A deal to sell Alstom’s power assets, which account for about 70 percent of total group revenue, would effectively break up the engineering group and leave Alstom as a pure transport business, already known for its high-speed TGV trains.
However, it could be less politically sensitive than a full takeover offer for the company, talk of which caused Alstom shares to soar on Thursday.
“By separating Alstom Transport, which may remain an independent French company and national champion, resistance could stay muted,” Berenberg’s William Mackie wrote in a note.
The French government weighed into the issue anyway on Friday. French Minister for Industrial Renewal Arnaud Montebourg promised to protect the national interest and to study “other solutions and scenarios” for Alstom, one of France’s top private-sector employers.
The French government has a history of blocking takeovers by foreign companies. Last year, Yahoo Inc abandoned its plan to acquire a majority stake in online video Web site Dailymotion, owned by France-Telecom Orange, because of objections by the French government. In the energy sector, the government in 2006 brokered a deal to merge Gaz de France and Suez to block a bid for Suez by Italy’s Enel SpA.
GE has had its acquisition desires squelched by European regulators before. In 2001, the European Commission blocked GE’s US$42 billion purchase of rival diversified manufacturer Honeywell International Inc.
Analysts have speculated that a potential Alstom deal could allow GE to wring out a lot of cost savings, including through job cuts. Yet they said GE might not be able to fully realize the potential savings because the company will have to moderate any cuts to satisfy French authorities.
The trading of Alstom shares was suspended on Friday pending a statement from the company. The shares closed up 10.9 percent on Thursday after Bloomberg reported GE was in talks about a US$13 billion full takeover bid for Alstom.
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