Siemens and Mitsubishi Move To Finalise the Alstom Deal
Siemens and Mitsubishi Move To Finalise the Alstom Deal
Germany's Siemens and Japan's Mistubishi are now finalising the joint offer for Alstom's turbine businesses. This deal will include a cash element of around 9 billion euros ($12.25 billion) according to the bidders. As part of this complex offer to counter GE's $17 billion bid for Alstom's power arm, Siemens will be acquiring the gas turbines business while Mitsubishi will infuse cash and industrial assets to the JV in steam turbines.
Also included in the deal is that Mitsubishi and the French government will take equal stakes in Alstom. Around 29% of the French Group Bouygues will be acquired. The Mitsubishi-Siemensoffer is an alliance scheme to counter GE's proposal.
Mitsubishi and the State will acquire joint, equal stakes in Alstom. These holdings could be as much as 5 to 10 percent. It is not being considered to provide the government with a majority stake. Alstom also takes control of its energy transmission and renewables activities. This will not be part of the joint bid by Siemens and Mitsubishi. This is a good move for Alstom as the renewable energy arm is bound to yield higher profits as non-renewable energy sources face depletion.
In what will be completely independent of the turbines deal, both Siemens and Alstom will join their rail activities. At this stage, it has not been clarified which stakes the 2 firms will have in the business. Berlin will also consider buying shares to remain at par with Paris in a group comprising the high-speed ICE and TGV train activities of Siemens and Alstom.
This is an industrial and commercial partnership though one source was quoted as saying what makes sense on paper is not enough and “You need to see the stars align”. Siemens and Mitsubishi are going to offer 9 billion Euros in cash in a deal that cannot be compared to GE because the two are very different kettle of fish.
With the Siemens-Mitsubishi deal, Alstom looks to be a centre of the European rail industry and take part in the energy business. These are the high points for the French government. If GE wants to win the deal, it will have to focus on sweetening the alliance a little, according to experts.
On the other hand, the Siemens-Mitsubishi deal too has its share of considerations. Both firms have to convince the French government of how the deal will also create job growth.
Ultimately, the deal that preserves Alstom's identity is going to be the chosen one, according to French Economy Ministry Montebourg. With each side looking to charm Alstom with the deal, it is a rivetting tale to the finish. What twists and turns are ahead rest firmly with the enterprising executives of GE, Siemens and Mitsubishi. They will play the starring role in this interesting deal-maker (or breaker).
