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

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."

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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.

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