Siemens AG (SIE) is preparing a bid for Alstom (ALO) SA’s energy unit that would leave it with the French company’s gas turbines while allowing partners Mitsubishi Heavy Industries Ltd. (7011) and Hitachi Ltd. (6501) to expand their steam turbines and hydro businesses, people familiar with the matter said.
Siemens may pay about 4 billion euros ($5.4 billion) in cash for Alstom’s gas turbines, according to a person familiar with the matter, who asked not to be named as the matter is private. The bid would be further boosted by Mitsubishi Heavy, Hitachi and Alstom merging their steam turbines and hydro assets, with the Japanese companies taking a minority stake and making a cash payment, people familiar with the plan said. Siemens and Alstom may also attempt to combine their rail assets, creating a European transport group, the people said.
The planned bid may put pressure on General Electric Co. (GE:US) to improve the terms of its $17 billion offer for Alstom’s energy assets, which excludes the French company’s transport business. Each side has competed for the backing of the government, which aims to preserve French interests regarding jobs, research centers, and turbines for nuclear plants.
“We’re not finished with improvements, on both sides,” French Finance Minister Michel Sapin said yesterday. Siemens’s offer becomes more attractive with Mitsubishi Heavy participating, he said.
Siemens is also pledging to create 1,000 additional jobs in France, according to a person familiar with the matter. That would match a similar promise from GE last month.
Under the proposed German-Japanese offer, which may get announced as early as today, the French government and Mitsubishi Heavy may buy the 29 percent stake in Alstom held by Bouygues SA (EN), the people said. Mitsubishi Heavy would take a 10 percent stake in Alstom, another person said.
Alstom’s initial assessment of the Siemens-Mitsubishi plan is that it’s too complex, requiring a mix of cash and assets and the creation of joint ventures and the separation of existing operations, according to two people familiar with the matter. The French company doesn’t view a separation of the gas and steam turbines business as viable, the people said.
Siemens gained 0.2 percent in Frankfurt trading as of 11:59 a.m., while Alstom rose 0.3 percent in Paris.
Siemens and Mitsubishi Heavy have said they will decide by today whether to submit a joint offer to Alstom’s board of directors. A Siemens spokesman declined to comment beyond that statement. Representatives for Alstom and Mitsubishi Heavy also declined to comment.
Siemens Chief Executive Officer Joe Kaeser was scheduled to meet Mitsubishi Heavy CEO Shunichi Miyanaga today to finalize the terms of the offer. Both executives plan to speak at the economics affairs committee of France’s National Assembly tomorrow. GE CEO Jeffrey Immelt made a rare appearance by a U.S. corporate leader before the same committee in May, saying GE would protect jobs and the nation’s industrial base.
French President Francois Hollande will also meet executives from Siemens and Mitsubishi Heavy tomorrow, his office said in a statement.
GE, based in Fairfield, Connecticut, has said it’s flexible on the terms of its bid, signaling a willingness to make concessions in negotiations with the French government.
“We have made progress in our discussions with the French government, including expanded alliances in the energy businesses with French investors as well as a global partnership with Alstom on transport,” Deirdre Latour, a spokeswoman for GE, said yesterday, declining to comment on details of the bid. “Alstom will remain a vibrant player in the energy and transportation industries.”
French Economy Minister Arnaud Montebourg has said he favors Siemens’s offer because the proposal includes swapping its trainmaking business for Alstom’s energy assets to create two leading European companies in rail and energy. At the same time, Montebourg has also said GE’s bid is much improved after the company has pledged to create new jobs in France. Alstom’s trainmaking unit isn’t part of GE’s offer.
The U.S. company agreed last month to a French government request to extend the deadline for consideration of the Alstom offer to June 23. French officials asked for the three-week delay while seeking better terms for an acquisition.
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