* Deal could be announced in coming days
* Alstom would be reduced to transport assets
* French government says it's working on "other solutions"
(Adds meeting details, context on regulatory history)
By Benjamin Mallet and Matthieu Protard
PARIS, April 25 U.S. industrial conglomerate
General Electric Co is in advanced talks to buy the
global power division of struggling French engineering group
Alstom SA for about $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 on
Sunday 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
Alstom Chief Executive Patrick Kron confirmed to union
representatives there were talks about an "industrial deal," but
did not name GE.
Alstom, Bouygues and General Electric 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.
It could, however, 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 Economy Minister 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. He said he had already met Kron on Thursday and would
meet GE Chief Executive Jeff Immelt "shortly."
Immelt was set to meet with French prime minister Manuel
Valls and Montebourg on Sunday, according to news agency AFP.
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 website
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
$42 billion purchase of rival diversified manufacturer Honeywell
Analysts have speculated that a potential Alstom deal could
allow GE to wring out a lot of cost savings, including through
job cuts. But 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.
Alstom was bailed out by the French state in 2004 and relies
heavily on orders from national rail operator SNCF and utility
EDF. It employs 18,000 people in France, half of them
in the power business, out of 93,000 worldwide.
Alstom's power assets include turbines for coal, gas and
nuclear power plants, wind farms and systems for power
transmission and distribution.
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 $13
billion full takeover bid for Alstom.
Before that report, Alstom shares slumped 20 percent in 12
months on concerns over its cash flow, and its weakening
prospects prompted Bouygues to take a $1.9 billion writedown on
its stake in February.
Alstom is much smaller than its other main rival, German
group Siemens AG, and its orders have slumped since
the 2008 economic crisis depressed demand for power equipment.
In need to raise cash, Alstom reached out to GE, two
industry sources said. Bouygues has declined to comment beyond
saying it supported the company's strategy.
Bouygues shares closed up 4.17 percent on speculation a deal
would enable Alstom to return cash to shareholders, either via
an exceptional dividend or a share buyback. Shares of GE, which
has a market capitalization of $265 billion, closed up 0.5
percent on Friday.
Industry sources said Alstom was strong in steam turbines
used by the nuclear industry, while GE is a top player in gas
turbines and not so strong in steam. A deal would also enable GE
to expand into wind power and grid technology, they added.
The deal would let GE "materially strengthen their
competitive position in the global power market," said Brian
Langenberg, an analyst with Langenberg & Co.
GE, which already employs over 10,000 people in France, has
said it wants to increase its earnings contribution from
industrial operations relative to its financial activities.
Ten years ago, when France was negotiating a bailout for
Alstom with European Competition Commissioner Mario Monti,
Siemens was a potential buyer of its power arm. In the end, then
French president Nicolas Sarkozy balked at the prospect of
German ownership and Alstom remained intact.
A report in Friday's Le Figaro said Alstom had looked at a
similar asset swap with Siemens more recently, whereby Alstom
would have exchanged its power business against Siemens' rail
business. Siemens declined to comment.
(Additional reporting by Natalie Huet, Gilles Guillaume,
Elizabeth Pineau and Dominique Vidalon in Paris, Anjuli Davies
in London and Lewis Krauskopf in New York; Writing by Natalie
Huet and Andrew Callus; Editing by Andrew Roche)