By Inti Landauro
PARIS--Shares in Alstom SA soared Thursday, even after the
company said it wasn't aware of a takeover bid from General
Electric Co.
The French maker of trains and turbines for power plants said it
has talked to GE in the past over areas it declined to specify, but
said it had no information about a takeover approach.
"I cannot deny that there were ever talks between Alstom and GE
on other issues," said an Alstom spokeswoman. "But that is leading
to speculation and rumors."
In a statement, Alstom said it would provide an update on the
"prospects of its activities" on May 7, when it is scheduled to
release annual earnings data. A GE spokesman declined to
comment.
Alstom shares opened up 16%--before slipping back
modestly--after Bloomberg reported that GE was in talks to buy the
French engineering firm.
A person with direct knowledge of the matter said that while
there are regularly talks between GE and Alstom about possible
industrial partnerships, the two groups weren't discussing a
potential sale.
Alstom, known for its iconic TGV superfast train, has been
struggling amid cutbacks in capital spending by Europe's utilities,
slack economic growth in the continent and weaker emerging markets.
Chief Executive Officer Patrick Kron unveiled a plan last November
to slash about $2 billion in costs through job cuts and other
measures, and has planned to raise cash by selling a minority stake
in its flagship train business and other assets.
The weak outlook drove its shares to a nine-year low earlier
this year, although they have rebounded somewhat. The company's
struggles have weighed heavily on its single largest shareholder,
family-controlled conglomerate Bouygues SA. The
construction-to-telecom group said in February it wrote down the
value of its investment in Alstom by EUR1.4 billion ($1.9 billion),
resulting in a net loss for 2013.
Bouygues has also been struggling in another core
business--telecoms, losing out earlier this month to cable firm
Altice SA in its hot pursuit of Vivendi SA's mobile phone business
SFR.
A Bouygues spokesman said Thursday it supports Alstom's
strategy. "Bouygues is a large shareholder in Alstom but doesn't
control the company," the spokesman said.
Bouygues' shares also jumped and were trading up 4.8%.
Any deal surrounding Alstom would have deep political
significance in France, 10 years after a brutal fight to prevent
the company from being dismantled. In 2004, with the help of then
French Finance Minister Nicolas Sarkozy, Mr. Kron succeeded in
limiting the demands of European Union antitrust authorities, which
wanted Alstom to sell core businesses in exchange for approving a
government bailout. The company was eventually rescued by the
French state and sold a number of units, including its industrial
turbine operations to German rival Siemens. Bouygues subsequently
acquired the government stake.
French Prime Minister Manuel Valls described reports about a
possible takeover of Alstom by General Electric as "rumors" and
said he doesn't comment on rumors. He said his government is
following the situation of Alstom closely. "We are paying close
attention to jobs, technology and decision-making centers," he
said.
Alstom is a competitor of GE's focusing on power generation and
trains, two businesses that are core to the U.S. conglomerate's
industrial operations. While GE mainly builds locomotives that haul
cargo, Alstom has a strong position in commuter trains and
metros.
GE Chief Executive Officer Jeff Immelt is under pressure to
boost earnings from the company's industrial operations, which
investors value more highly than its finance business, which is
highly profitable but perceived as more risky. Mr. Immelt has
promised investors that the company will lower the share of
earnings coming from GE Capital to 30% of the total, from under 50%
now.
To that end, GE is selling its North American consumer finance
business. But the industrial businesses aren't growing quickly, and
an acquisition would speed the rebalancing of the conglomerate's
portfolio.
Mr. Immelt has said he prefers smaller acquisitions in the $1
billion to $4 billion range. Last week, however, he opened the
window to bigger "opportunistic deals that have excellent values,
strong synergies, fit our growth strategies and are immediately
accretive."
Any pursuit of Alstom would come amid a recovering merger and
acquisition climate in Europe, much of it cantered around French
companies.
"Despite short-term financial shortfalls, over the long-run,
Alstom has a good collection of assets, including the best
high-speed rail transportation technology on the market," said
William Mackie, an analyst with Berenberg. "It is a good fit for
General Electric at a reasonable valuation."
Noémie Bisserbe and Ruth Bender contributed to this article
Write to Inti Landauro at inti.landauro@wsj.com and Kate
Linebaugh at kate.linebaugh@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires