New Siemens-Mitsubishi Bid Could Upset GE’s Buyout of Alstom Assets

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The battle for French manufacturing giant Alstom SA (EPA:ALO) (OTCMKTS:ALSMY)’s energy assets is heating up. Siemens AG (ADR) (OTCMKTS:SIEGY) released a statement today pointing out that its joint bid with Mitsubishi Heavy Industries, Ltd. (TYO:7011) for Alstom SA’s energy operations is clearly superior to an offer from General Electric Company (NYSE:GE), as both bidders jockey for the backing of the board and the French government.

The new Siemens-Mitsubishi offer places a value of 14.2 billion euros ($19.3 billion) on Alstom SA (EPA:ALO) (OTCMKTS:ALSMY)’s energy assets, which compares favorably with General Electric Company (NYSE:GE)’s 12.35 billion-euro valuation for those operations, Siemens reps emphasized in a presentation in Paris on Tuesday.

Background on the GE – Alstom deal

General Electric Company (NYSE:GE) has been negotiating with Alstom since February, but the French government got wind of the negotiations a month or so ago, derailing the almost finalized deal. This new German-Japanese proposal opens up the entire bidding process, and puts pressure on GE to improve its offer for Alstom SA (EPA:ALO) (OTCMKTS:ALSMY)’s energy assets. GE made its bid nearly seven weeks ago now, as CEO Jeffrey Immelt is trying to expand into Europe and take market share from Siemens, the region’s biggest engineering company.

Highly complex, multi-party deal

Not all analysts are convinced this new offer is all it’s stacked up to be, and its even possible General Electric Company (NYSE:GE) can still make the deal work with only a few minor concessions. William Blair & Co. analyst Nick Heymann commented on the possibilities in a Bloomberg TV interview, “The Siemens-Mitsubishi offer may fail to convince the Alstom SA (EPA:ALO) (OTCMKTS:ALSMY) board as it would break apart the company’s steam- and gas-turbine business.”

“That’s really not viable since all turbines except those sold for coal and nuclear plants are sold bundled with gas turbines for combined cycle applications, and the servicing of those is also combined,” he continued. “So breaking them apart reduces their critical after-market for service and sales.”

Other analysts point out that the Siemens-Mitsubishi’s offer addresses the French government‘s demands that Alstom SA (EPA:ALO) protect the sovereign interests of the country’s nuclear power industry. In this context, Mitsubishi said it would cooperate with Alstom on research and development, procurement, production and possible partnerships.

“The joint venture structure will help solve some of the political concerns in France,” Commerzbank analyst Ingo-Martin Schachel said. “The Siemens offer should certainly be considered realistically by Alstom shareholders.”

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