General Electric and Alstom, the struggling French conglomerate at the center of a politically charged takeover battle, finally said publicly on Wednesday what the business world has known for a week: G.E. is ready to acquire Alstom’s energy business in a $13.5 billion deal, reports The New York Times.
The Alstom board “has unanimously endorsed G.E.’s offer,” Patrick Kron, Alstom’s chairman and chief executive, told reporters, and will form a committee of independent directors to review the G.E. proposal before the end of May.
Mr. Kron and his counterpart at G.E., Jeffrey R. Immelt, who spoke with journalists at a briefing in Paris, expressed confidence that the deal would go through next year.
But Mr. Kron said Alstom’s directors would also consider a rival offer from the German industrial giant Siemens to take into account the concerns of the government and because “it is our fiduciary duty to shareholders to do so.”
G.E. is seeking to buy Alstom’s thermal power, renewables and electrical grid divisions. Alstom’s energy business employs 65,000 people and had revenue last year of 14.8 billion euros, or $20.4 billion, about 70 percent of the company’s revenue.
“This is the biggest deal we’ve ever done” in G.E.’s history, Mr. Immelt said, noting that it would add $10 billion a year to the 122-year-old company’s revenue. “We wouldn’t have contemplated it without a certain amount of confidence that we knew the territory.”
Since news of the talks leaked last week, the French political establishment has been seeking to force Mr. Kron to put the brakes on a deal that would dismantle a company that symbolizes France’s industrial and technological prowess.
Economy Minister Arnaud Montebourg has demanded that Alstom consider a less fully developed proposal from Siemens for an asset swap. He has publicly excoriated Mr. Kron, accusing him of having kept the talks secret from the government. In addition to the approval from the Alstom board, the G.E. offer is also favored by Alstom’s controlling shareholder, the French billionaire Martin Bouygues.
Alstom said in a statement that the committee of directors would take into consideration the interests of all stakeholders, adding that “Patrick Kron and the committee will liaise with the representatives of the French State to consider their views.”
Shares of Alstom, which soared more than 10 percent last Thursday after Bloomberg News revealed the talks, rose another 9 percent in afternoon trading in Paris on Wednesday. Trading in the shares had been suspended since Friday.
Mr. Kron declined on Wednesday to discuss a Siemens bid, saying, “We don’t have an offer.”
On Tuesday, the Siemens board formally backed making an offer to swap its transportation business for Alstom’s energy business, contingent on gaining access to Alstom’s books for due diligence work. Such an arrangement would make Alstom the European leader in rail transport, while Siemens would gain scale to compete with General Electric, Mitsubishi Heavy Industries of Japan, and rising contenders in Asia.
Mr. Montebourg has not conceded any territory. Speaking to a parliamentary committee on Wednesday, he made clear that he favored the Siemens approach, saying: “We want alliances, we don’t want absorptions.”
The case “is not closed,” Mr. Montebourg told the Economic Affairs Committee. “We have been heard, we have a month to decide.”
He said that the state was considering building a stake in Alstom, which makes high-speed TGV trains and a range of high-tech energy equipment, including windmills and turbines for nuclear power plants.
Mr. Immelt, who met this week with French officials including Mr. Montebourg and President François Hollande, played down concerns that politics could derail the bid, pointing to General Electric’s nearly five decades in France and its large presence in the country. He described G.E.’s jet engine business with Safran as “probably the best joint venture in the history of the world.”
Mr. Immelt said the deal would generate more than $1.2 billion in annual cost synergies, and that it was good for both companies.
He said he had sought to reassure France on the question of jobs, a primary consideration for President François Hollande’s Socialist government at a time of high unemployment.
“We can add breadth, reach, R&D and technology” to the French company, Mr. Immelt said, adding: “We talked about growing employment for Alstom in manufacturing and engineering.”
Siemens, which would have considerably more in the way of redundant operations to integrate than would G.E., has committed to the government not to engage in mass layoffs.
Mr. Kron said a deal with G.E. would enable Alstom to invest in the transport business as a stand-alone company, as well as to pay down debt and return cash to shareholders.
As for the government’s criticism, he said: “Whatever is excessive is irrelevant. I refute the accusation that I have lied.”
Read more of this report from The New York Times.