Alstom takeover: Siemens-MHI pledge vs. tangible
Siemens and Mitsubishi just submitted a proposal for acquiring parts of Alstom. GE has little to worry about.
The proposal Siemens and Mitsubishi submitted to the French government yesterday is very surprising for three reasons:
1) There is no mention any more of the creation of an “European transportation champion” that would have been created from the merger of Siemens transportation business with Alstom’s.
2) Mitsubishi role is bigger than expected.
3) The proposal is quite complex.
The offer looks as much as a Mitsubishi proposal with Siemens’ participation as the other way around. It includes a tangible part and a “pledge” part. In the tangible part, Siemens’ involvement is much more limited than expected. Siemens offers to acquire 100 per cent of Alstom’s gas business for Euro 3.9 billion in cash. Mitsubishi’s involvement is more significant than expected. MHI (Mitsubishi Heavy Industries)intends to create three joint ventures by acquiring 40 per cent of Alstom’s Steam and Nuclear business, 20 per cent of Alstom’s Grid business and 20 percent of its Hydro business” and in so doing will inject into Alstom Euro 3.1 billion in cash.
The list of pledges is quite extensive. Siemens “intends” to offer a job guarantee for three years in France and Germany for the transferred business after closing of the transaction. The company also intends to “explore” with Alstom to utilize the opportunities of both companies in order to create a European mobility champion. Siemens “plans” to establish its European Headquarters for the combined gas service business in France. MHI pledges that its alliance with Alstom “will enable” the creation of more than 1,000 jobs in France and MHI promises to enter into “various cooperation agreements” with Alstom in the following possible areas:
R&D: joint development of new efficient products, leveraging our respective technologies; Common procurement: shared worldwide procurement capabilities, joint sourcing of mission-critical components; Manufacturing: best practice in manufacturing technology, quality control and safety, shift of workload to Belfort when possible; Products and Services: promotion of Alstom’s technologies in Japan, cross- selling of Alstom and MHPS products, shared after-sales service network; EPC: joint bidding approach to large projects.
MHI also “contemplates” becoming a shareholder of Alstom through an acquisition of Alstom 10% of Alstom’s shares from Bouygues.
One thing is for sure, this “compelling” proposal will not convince Alstom shareholders, the French government, French trade unions and certainly not Bouygues. With almost 30% of Alstom’s equity, the French conglomerate needs cash and expects to sell all the Alstom equity it owns.
GE has little to worry about. Most experts in France find Siemens-MHI’s proposal not very convincing