The Americans and the French have been getting on well of late. President Francois Hollande’s successful visit to the White House in February is a case in point — despite the backdrop of his high-profile sex scandal.
However, the U.S.-France relationship may be put to the test later this week if the reported bid by General Electric (GE) to acquire Alstom comes to pass.
The French are famous for fiercely guarding the country’s assets, jobs and the ownership of its companies. Indeed, the French government last week warned GE that it was ready to fight for its national interests if GE did make a multi-billion dollar bid.
The background here is that the government bailed out Alstom ten years ago to the tune of €2.5 billion; and the firm relies heavily on orders from state-owned rail operator SNCF and utility EDF. The government won’t want to put that legacy at risk.
If GE does seek to buy Alstom or its energy assets — which account for 70 percent of the French company's sales — then completing an acquisition would not be simple or quick.
There are plenty of reasons why such a deal would be of interest.
Over the last few years Alstom has built up a significant global market share within the international energy markets.
In early 2011 it opened a turbine nacelle factory in Amarillo in the U.S. Later that year it opened a 300-MW manufacturing facility in Brazil. And, in March 2012, it confirmed plans to open factories in Cherbourg and Saint-Nazaire after winning a French offshore wind farm tender with EDF and Dong Energy.
That is not to say the company is problem-free. It has been hit by the shift in European energy markets away from traditional energy sources, and last year it revealed plans to cut 1,300 jobs, mainly in its coal-fired boiler business.
But there is still plenty to recommend the company to GE. It has seen some stable group financial performance and strong growth within the energy division, in particular within renewables. This presents a compelling case.
The deal would also be a smart way for the U.S. manufacturer to consolidate its position within key growth markets, such as Brazil.
Here, both firms have already established an operating base, and merging the two units could reduce overheads and costs and remove a key competitor.
Couple this with GE's increasing desire to tap into the global offshore market — an area in which it has been largely shut out — and the rationale stacks up.
But that doesn't mean it's a done deal, as it has become public over the weekend that Siemens is also in the running for Alstom's energy assets to prevent GE growing its presence in Europe. A deal with Siemens may find more favour with France's leaders.
Both Alstom and GE senior management have remained tight-lipped in recent days. Alstom has denied a formal approach; GE has refused to comment; and Bouygues, which owns almost 30 percent of Alstom, has also said nothing.
Whatever happens, all this speculation has certainly been well timed to create maximum impact for Alstom, which is scheduled to deliver its financial results on 7th May.
This article was originally published on A Word About Wind and was republished with permission.
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