PARIS--The French government has reached an agreement to
purchase a stake in Alstom SA from its leading shareholder, Economy
Minister Arnaud Montebourg said Sunday, clearing the way for
General Electric Co. to complete its acquisition of most of the
French industrial firm.
The accord--hashed out in marathon talks between the government
and French conglomerate Bouygues SA--grants the government an
option to buy as much as 20% of Alstom from Bouygues at a future
date, Mr. Montebourg said.
Bouygues, whose businesses range from construction to
telecommunications, said the government's option to buy Alstom
shares will last for 20 months and begin after the GE-Alstom deal
closes. Under the agreement reached Sunday, the government can buy
shares held by Bouygues at a discount to their market rate, with a
floor price of about EUR35 ($47.60), Bouygues said.
"We reached an agreement with Bouygues," Mr. Montebourg told
French TV. The minister added that the government would move to
purchase the stake when Alstom shares were trading at their
"lowest" levels on the stock market.
The share-purchase agreement removes the final hurdle from GE's
pursuit of Alstom. The French government had warned that it
wouldn't sign off on GE's acquisition until the government bought
most of Bouygues's Alstom stake.
Paris is intent on becoming Alstom's biggest shareholder to
strengthen its grip on the maker of power equipment and bullet
trains. Alstom will emerge from the GE acquisition as an equal
partner in a series of joint ventures that employ thousands of
people in France and produce politically sensitive technology, such
as turbines for nuclear plants.
But the government's decision to purchase the stake at a future
date--and after markets have time to react to GE's acquisition of
Alstom's assets--marks a concession that could make buying the
stake more costly for the French state at a time when it is
struggling to meet budget targets approved by the European
Union.
Paris had previously insisted on paying Alstom's core
shareholder Bouygues a maximum of EUR28 a share, the stock's
closing price on the Paris Bourse on Friday, according to people
familiar with the matter. Bouygues, which is seeking to raise cash
to finance a restructuring at its telecom unit, was seeking a
significant premium over Alstom's last trading price, people
familiar with the matter said.
On Saturday, Alstom's board said it had officially accepted GE's
sweetened offer for its power-equipment unit, leaving the
government's haggling with Bouygues as the only obstacle to the
GE-Alstom deal.
The U.S. company on Friday changed its $17 billion initial offer
for the whole of Alstom's power business to make it more palatable
to the French government, which has been reluctant to let the
industrial jewel fall into U.S. hands and potentially threaten
French jobs.
GE revised its bid to give the France more say in Alstom's
future. Alstom would sell its gas-turbine business, the largest
part of the power-equipment unit, to the U.S. company. But it also
would house the French part of its steam- and nuclear-turbines
operations, renewable-energy activities and grid-equipment business
in 50/50 joint ventures with GE. The board said the new offer
benefits Alstom, its shareholders and other stakeholders.
The new GE offer still values the power-equipment business at
$17 billion, but values the Alstom investment in the joint ventures
at EUR2.5 billion ($3.4 billion), the Alstom board said
Saturday.
After the transaction, Alstom will buy GE's train-signaling
business and merge it with its own train business, which makes
France's signature bullet trains. Alstom intends to focus on its
train business in the future, the board said.
Write to Stacy Meichtry at stacy.meichtry@wsj.com and Inti
Landauro at inti.landauro@wsj.com
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