Tuesday 20 February 2018

Siemens is readying formal offer to Alstom for power assets

An apprentice inspects a section of cut metal at Alstom SA's welding training facility in Stafford, U.K.
An apprentice inspects a section of cut metal at Alstom SA's welding training facility in Stafford, U.K.

Siemens is readying a formal offer for Alstom under which it would transfer its rail activities and less than €7bn in cash to its French rival in exchange for its power assets, sources familiar with the German firm's thinking say.

The sources said that the offer under consideration put a slightly higher value on Alstom's energy activities than a rival bid from US giant General Electric.

But the cash component is expected to be only a little more than half of what GE is offering.

"Valuations for all the different elements have been done, but depending on which dials you turn you will arrive at different numbers for the cash element of the Siemens offer," one of sources said, adding that in any case it would be below €7bn.

Another source confirmed the cash part of the offer would fall under this threshold.

This reflects the fact that Siemens would be transferring its trains business to Alstom, allowing the French government to trumpet the creation of a new European rail champion.

Nuclear

It also follows a decision by Siemens to exclude some Alstom energy activities – nuclear, wind energy, and transmission and distribution (T&D) – from its bid, two sources said.

Both Siemens and Alstom declined to comment.

Alstom is already in talks with GE over a €12.35bn all-cash offer for its power arm, which has been extended until June 23. Under strong political pressure, it has opened its books to Siemens so the German firm can propose its own deal if it wants to.

Excluding Alstom's nuclear and wind businesses from its bid could allow the French group to sell them directly to state-controlled energy firm Areva. But it could also create problems as one source close to the French camp said it would be difficult to separate the nuclear side of the turbine business from non-nuclear activities.

As for the T&D business, valued at €1.5 to €2bn, sources said Siemens was worried that acquiring Alstom's assets in this area would create formidable regulatory hurdles given the dominant position Siemens already enjoys in the sector.

Irish Independent

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