FRANKFURT/MUNICH May 26 Siemens is
readying a formal offer for Alstom under which it would transfer
its rail activities and less than 7 billion euros in cash to its
French rival in exchange for its power assets, sources familiar
with the German firm's thinking say.
The sources told Reuters on condition of anonymity that the
offer under consideration put a slightly higher value on
Alstom's energy activities than a rival bid from U.S. giant
But the cash component is expected to be only a little more
than half of what GE is offering.
"Valuations for all the different elements have been done,
but depending on which dials you turn you will arrive at
different numbers for the cash element of the Siemens offer,"
one of sources said, adding that in any case it would be below 7
billion euros. Another source confirmed the cash part of the
offer would fall under this threshold.
This reflects the fact that Siemens would be transferring
its trains business to Alstom, allowing the French government to
trumpet the creation of a new European rail champion.
It also follows a decision by Siemens to exclude some Alstom
energy activities -- nuclear, wind energy, and transmission and
distribution (T&D) -- from its bid, two sources said.
Both Siemens and Alstom declined to comment.
Alstom is already in talks with GE over a 12.35 billion euro
($16.8 billion) all-cash offer for its power arm, which has been
extended until June 23. Under strong political pressure, it has
opened its books to Siemens so the German firm can propose its
own deal if it wants to.
Excluding Alstom's nuclear and wind businesses from its bid
could allow the the French group to sell them directly to
state-controlled energy firm Areva. But it could also
create problems as one source close to the French camp said it
would be difficult to separate the nuclear side of the turbine
business from non-nuclear activities.
As for the T&D business, valued at 1.5 to 2 billion euros,
sources said Siemens was worried that acquiring Alstom's assets
in this area would create formidable regulatory hurdles given
the dominant position Siemens already enjoys in the sector.
Therefore, the German firm has decided to also exclude T&D
-- a business that makes technology for transporting electricity
from power plants to consumers -- from its offer.
As previously reported by Reuters, Siemens would be offering
its rail activities and would propose creating a joint venture
with Alstom in rail signalling.
One source said Siemens was keen to retain a controlling
stake in any signalling venture, potentially another source of
conflict as Alstom is also seen eager to have a majority share.
How the signalling stakes are divided up would affect the cash
component of the Siemens bid, the source added.
Sources said the offer also reflected a deduction of up to
800 million euros to cover potential compliance risks that
Alstom's power unit faces in the United States, United Kingdom
While Siemens could present the formal offer for Alstom's
power arm as early as Wednesday of this week, one of the sources
said the German group may decide to take some extra time after
GE extended its bid until June 23 at the request of the French
(Reporting by Arno Schuetze in Frankfurt, Jens Hack in Munich,
Sophie Sassard in London, Matthieu Protard & Benjamin Mallet;
Writing by Noah Barkin)