PARIS (Reuters) - The French government was locked in negotiations on Sunday over its planned purchase of a stake in Alstom (ALSO.PA) from conglomerate Bouygues, the last hurdle in an announced tie-up between Alstom and General Electric (GE.N).
Talks between government officials and Paris-based Bouygues (BOUY.PA) over the price of the 20 percent holding are “on the right track” to conclude later in the day, two sources said.
France’s Socialist government has made the stake purchase a precondition for approving the GE offer for Alstom’s energy business, which formally expires on Monday. The government wants to ensure it has an influence in a complicated tie-up which will, for example, see Alstom’s power grid and renewable energy businesses put in GE-controlled joint ventures in France.
Construction and telecoms company Bouygues, however, has balked at official demands that it sell the holding at the market price, which amounted to 28 euros per share at Friday’s close of trading.
“The negotiations are intense, but gifts to Martin Bouygues are out of the question,” Economy Minister Arnaud Montebourg told daily Le Parisien in an interview published on Sunday - referring to the group’s chairman and CEO.
The GE-Alstom deal “will have zero cost to the French taxpayer,” he added.
Bouygues and Alstom declined to comment on the ongoing talks. Alstom on Saturday announced unanimous board support for the GE deal, which values Alstom’s energy business at 12.35 billion euros ($16.77 billion).
The government had endorsed the proposed deal a day earlier, rejecting a rival Siemens-Mitsubishi offer it had previously encouraged as ministers sought guarantees on domestic jobs and activities deemed strategic.
The announcement drew a line under a two-month battle for Alstom that had become heavily politicized as soon as the first reports of an agreed tie-up with GE appeared in April.
President Francois Hollande’s government and the main opposition UMP party were trading blows over GE-Alstom on Sunday, even before the tie-up was finalised.
Luc Chatel, the center-right party’s acting head, described the accord negotiated by Montebourg as a “lose-lose deal” for France and questioned why public funds were being invested.
“There was an (earlier) offer on the table that would have avoided a public investment,” Chatel said.
Siemens (SIEGn.DE) and GE had both revised their bids before Montebourg backed the U.S. group, also announcing that the state would pay Bouygues the “market price” for 20 percent of Alstom.
The declaration surprised Bouygues, which values the holding at 34 euros per share in its books - a premium of 380 million euros or 21 percent over its 1.73 billion market capitalization.
“Bouygues already intended to sell its stake, but they want to get out at 35 euros,” a source close to the discussions said. “The negotiations are purely about the price.”
The pressure to bow to the government’s will may be heightened by the embattled Bouygues Telecoms division’s need for supportive government reform and regulation of the sector.
Officials are examining possible deals or market measures to shield France’s weakest mobiles operator and its jobs from low-cost rival Free (ILD.PA). Bouygues lost out in a recent bidding war for rival SFR (VIV.PA) despite Montebourg’s backing.
The GE-Alstom deal announcement followed intensive last-ditch talks between Montebourg, Alstom CEO Patrick Kron, GE boss Jeff Immelt and their Siemens and Mitsubishi counterparts.
The U.S. group would acquire most of Alstom’s energy business including gas and steam turbines for power plants, while selling its rail signaling division for $800 million to reinforce the TGV train manufacturer’s transport offering.
The tie-up also establishes GE-controlled joint ventures in France to house Alstom’s power grid and renewable energy businesses. Strategically sensitive nuclear turbines would be placed under French government control.
GE’s 7.3 billion euro cash outlay amounts to a smaller windfall for Alstom shareholders than earlier envisaged - with a narrower perimeter of activities purchased outright.
Despite the concessions, granted in response to French concerns, the revised plan “remains accretive in year one”, GE chief Immelt said on Saturday.
In an interview with France’s Journal du Dimanche, Alstom’s Kron said he would stay on for an unspecified transition period before bowing out in favor of a new management team.
The deal is scheduled to close in 2015, subject to regulatory and shareholder approval.
($1 = 0.7366 Euros)
Additional reporting by Jean-Baptiste Vey and Benjamin Mallet; Editing by Mark Potter