Could two major makers of trains be on track to merge?
US firm General Electric has reportedly been talking to Alstom, builder of turbines and France’s high speed trains about buying it for $13 billion (9.4 billion euros).
According to Bloomberg, a General Electric bid would have the support of French conglomerate Bouygues, which own 29 percent of Alstom’s shares.
Those shares gained 10.9 percent on Thursday in response to the report. That was a big bounce back considering they have slumped 20 percent over the past year due to concerns about Alstom’s cash flow.
Alstom has been hit hard by economic weakness in Europe and a drop in orders for power equipment. It is currently shedding 1,300 jobs. Its train business has held up better and secured record orders.
Alstom denied the GE rumour, but in a not very convincing way. It said it had not been informed of any potential public tender offer, which could be interpreted as a Watergate style non-denial denial – that responding to a question that had not been asked.
There is also a political element. The big question is – could a takeover by a US company get the approval of the French government and unions?
Pierre Briancon, European Editor of Reuters BreakingViews thinks it would be difficult: “We’ve a government, a new prime minister, who’s trying to engineer the famous, or infamous, supply side shock that François Hollande wants to instill. They’re trying to reform, cutting spending, cutting labour costs, doing overall very business friendly policies. Which is proving to be a hard sell in France.”
Prime Minister Manuel Valls would not comment on the report. He did say that, as with other big French companies, the government would keep a close eye on jobs, technology and decision-making.
The Economy Minister Arnaud Montebourg is known to oppose foreign companies buying French firms.
Montebourg has in the past verbally attacked big business and the European Commission. Last year he intervened to prevent Yahoo from taking over French online video-sharing site Dailymotion from telecoms operator Orange.
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