(Adds Alstom no comment, other perspective on deal)
PARIS May 6 French President Francois Hollande
said General Electric's bid for Alstom's energy
business is not acceptable as it stands, and the government's
aim is to get better offers.
"The bid is not good enough, it's not acceptable," Hollande
told RMC radio on Tuesday.
Asked whether it was possible that the state, which
currently holds around 1 percent of Alstom, could increase its
stake in the ailing engineering group, he said: "For now I would
prefer to get better offers."
Alstom said last week it was reviewing a binding $16.9
billion bid from GE for its energy arm, although it has not
turned down a rival offer from Germany's Siemens.
French Economy Minister Arnaud Montebourg came out against
the GE offer on Monday, but opened the door for a deal that
would also combine the two companies' rail businesses.
"In its current form, we unfortunately cannot give backing
to the proposals that you have made based solely on the purchase
of Alstom's energy activities," Montebourg wrote in a letter to
GE's chief executive, Jeff Immelt.
GE reiterated its statement from Monday, in which it said:
"We believe our proposal is good for France, for Alstom and for
GE," adding, "We are open to continuing dialogue."
Alstom declined to comment.
Some analysts doubted the logic behind combining Alstom and
GE's transport businesses.
GE's transportation unit sells diesel-electric locomotives
mainly used for freight rail applications, which is a
"completely different market" than Alstom's business that
focuses on passenger transit, William Blair analyst Nick Heymann
said in a research note.
Heymann said the idea "makes little strategic sense."
A source close to the talks said the comments from the
French government underscored the fact that there was no real
alternative to GE's offer.
"That's why the government is fretting so much, to twist the
arm of the only one able to offer anything," the source said.
A second source close to the talks said GE's locomotive
business is of little interest to Alstom, which believes it can
be a strong standalone player in transport helped by the
proceeds from the sale of its power business.
GE's rail signalling business may be more desirable to
Alstom. In a letter to Hollande last week, Immelt said GE had
decided to study with Alstom "the possibility of creating a
joint venture with GE's global signalling business, along with a
technological partnership." The letter was published by
newspaper Les Echos and confirmed as authentic by GE.
Revenue in GE's transportation segment slumped 14 percent to
$1.23 billion in the first quarter from a year earlier, hurt by
a poor environment for the mining sector. GE reported overall
quarterly revenue of $34.2 billion.
Shares in Alstom fell 2.2 percent, while GE shares were off
(Reporting by Mark John, Ingrid Melander, Benjamin Mallet and
Natalie Huet in Paris, and Lewis Krauskopf in New York; Editing
by James Regan, David Gregorio and Leslie Adler)