This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

France's New Anti-Takeover Powers Imperil GE Bid for Alstom Unit

Stocks in this article: GE

PARIS (The Deal) -- The French government has given itself new powers to block foreign investment in strategic industries including energy, in a move that could have ramifications for General Electric's (GE) 11.4 billion euro ($15.6 billion) bid for Alstom's power business.

The surprise move extends a law introduced in 2005, which had focused on defense companies, to give the state power to demand concessions or block bids for companies operating in six sectors: energy, water, transport, communications, defense and health.

"It is for the government to ensure that its legitimate objectives are fully taken into account by foreign investors, whether from within the European Union or other countries," Minister for the Economy and Industry Arnaud Montebourg said in a statement. "This new power will naturally be applied in a selective and proportionate manner."

WATCH: More market update videos on TheStreet TV | More videos from Ruben Ramirez

The timing of the new law appears ominous for GE and Alstom, which has backed the Fairfield, Conn.-based bidder's offer but also opened its books to allow Siemens (SI) to table a competing bid. The announcement comes 10 days ahead of European Parliament elections in which President Francois Hollande's Socialist Party is expected to perform poorly amid ongoing criticism of its failure to cut France's unemployment rate of over 10%. It also coincides with a debate in the U.K. about whether the government should extend its more limited powers to intervene in mergers in the wake of Pfizer's unsolicited 63.1 billlion pound ($106 billion) bid for AstraZeneca, Britain's No. 2 drugs maker.

Montebourg and Hollande have both said they are opposed to GE's cash bid for Alstom's electricity grid and generator construction units. Hollande on May 6 declared the offer "unacceptable" as it did not offer enough protection for Alstom's French employees. Montebourg has said that the deal could fatally undermine Alstom's future and that he prefers an asset swap with Siemens, which has proposed exchanging some of its rail operations for Alstom's power unit.

The government had given no indication of the power grab ahead of Thursday, when the move was announced without fanfare in the official government journal.

France last extended the state's power to intervene in foreign takeovers in 2005 under th- then Prime Minister Dominique de Villepin. That law gave the state the power to block foreign takeovers of arms manufacturers, security service providers, biological disease antidote makers and companies that could be used to launder money, such as casinos.

France's politicians periodically crank up fears surrounding foreign bids for strategic industries and large employers, typically as a way of asserting their own pro-jobs credentials. The definition of strategic industries has at times appeared tenuous. Villepin coined the phrase "economic patriotism" in 2005 when he declared yoghurt maker Danone off limits amid rumors of a potential bid from PepsiCo. Montebourg had previously declined to rule out state intervention in GE's bid for Alstom.

GE CEO Jeff Immelt has met with both Hollande and Montebourg in recent weeks to discuss his bid. Immelt said on May 6 that he was willing to discuss the terms further after Mountebourg wrote to him to say that the state would not support the offer and asked GE to consider selling its transport activities to the French company.

GE is offering $16.9 billion for Alstom's power operations, including $3.4 billion of cash on the operations books. Its offer includes commitments to increase the number of employees in France and to establish French headquarters for GE's international electrical grid, hydroelectric, wind energy and steam turbine operations.

Siemens is expected to table its offer by the end of the month.

Shares in Alstom traded Thursday at 29.04, euros down 0.28 euro, or just under 1%, on their Wednesday close. The company has a market capitalization of 8.96 billion euros.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs