Tuesday, May 6, 2014

The (Energy) Business of National Security

The New York Times Dealbook Blog reports that France is opposing GE's attempt to acquire a large portion of Alstom:

“While it is natural that G.E. would be interested in Alstom’s energy business,” France’s economy minister, Arnaud Montebourg, said in a letter to Jeffrey R. Immelt, the G.E. chairman and chief executive, “the government would like to examine with you the means of achieving a balanced partnership, rejecting a pure and simple acquisition, which would lead to Alstom’s disappearing and being broken up.”

The government’s legal means for stopping a deal would appear to be limited, though it could refuse to approve such an investment on national security grounds. The government does not hold Alstom shares, but the company is considered important enough to have received a 2.2 billion euro bailout in 2005. And Mr. Montebourg noted in the letter on Monday that the government was Alstom’s most important customer.

Alstom’s energy units, which make turbines for nuclear, coal and gas power plants, as well as the grid infrastructure to deliver electricity, contribute about three-quarters of the company’s 20 billion euros, or about $30 billion, in annual sales.

Alstom is France's largest industrial entity, and the government says the deal, as the Times put it, "should be reconfigured on a more equitable footing."  France is concerned about "maintain[ing] its technological sovereignty.”  

That's fine, I suppose, but it seems to me this kind of forced restructuring is more likely to result in a weaker Alstom long term, even if it extends the life of the entity as it now appears.  There may be times when foreign ownership of an entity is a real threat to national security, but this appears more likely to be national pride, than national security because the security concerns can be addressed in other ways.  Sometimes foreign ownership is better the alternative, even if it makes a major, traditional company a more international conglomerate.  Right, Chrysler?  


Business Associations, Corporations, Joshua P. Fershee, M&A | Permalink


Meanwhile in India gm is flouting takeover laws by giving proposing an open offer to the investors of Alstom which has the buying price of the share less than the current price of the shares.

Posted by: Puneet Passi | May 6, 2014 12:53:19 PM

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