Immelt’s 100-Hour Weeks Sealed Alstom Prize
His government planned to purchase a 20 percent stake in Alstom SA (ALO), the French manufacturer at the heart of a takeover battle between Fairfield, Connecticut-based General Electric Co. (GE) and Siemens AG of Munich, Montebourg told a press conference hours before kick-off on June 20. GE would gain energy assets from Alstom for $17 billion, while a competing group led by Siemens walked away empty-handed.
Montebourg’s coup stunned participants in the takeover as much as observers. Just hours earlier, GE Chief Executive Officer Jeffrey Immelt emerged from the French presidential residence after an amicable 45-minute meeting with the Socialist head of state, Francois Hollande, according to a French government official. Under the crystal chandelier of the Green Salon, with its views of the Elysee Palace gardens, Immelt learned that he would win the deal, clinching the biggest takeover in the U.S. company’s history, the official said.
The catch: the government’s demand for a stake in the rest of Alstom, which it would buy from construction group Bouygues SA. (EN) Montebourg only produced that nugget after Immelt returned from the courtyard of the Elysee to the offices of GE’s power-conversion unit on the other side of the Seine River, where the U.S. company had set up shop for its CEO during his increasingly frequent trips to the French capital.
This story is the result of on- and off-record interviews with several people with knowledge of the GE-Alstom deal. Spokesmen for Siemens (SIE) and GE declined to comment, while Montebourg’s office did not return calls seeking comment. An Alstom representative declined to comment.
With plenty of other matters to attend to, Immelt tried in recent weeks to balance trips to France with others to China and California, while getting regular updates from Paris. Those demands resulted in 100-hour work weeks.
In Paris, discussions continued. The government, blindsided in April by Alstom’s talks with GE, had elbowed its way to a seat at the table, inserting itself into talks with a foreign acquirer for the first time in the recent history of Europe’s second-largest economy. Montebourg succeeded in putting his mark on the bid and embraced dealmaking with gusto, first by soliciting a counteroffer from Siemens before negotiating a final deal with Immelt himself.
As part of the transaction, GE will buy outright Alstom’s lucrative gas turbine business, and create joint ventures in nuclear and steam power, renewable energy, and electric grids. Those ventures will make it a long-term partner of the French state, which in addition to its direct Alstom shares will also have a veto over some decisions in the nuclear business.
The structure is much changed from GE’s initial proposal, which envisioned a more straightforward acquisition of all of Alstom’s energy assets, accounting for almost three quarters of its sales.
With Hollande’s political allies congratulating themselves on averting the disappearance of a major French company into the vortex of a U.S. conglomerate, the deal may provide a blueprint for political intervention in future takeovers.
It also created a stage for Montebourg, a popular figure on the Socialist party’s left wing who may challenge Hollande for the 2017 presidential nomination. The compromise, officially signed on June 22, allowed both Immelt and Hollande to emerge from the contest as victors, an increasingly rare piece of good news for the embattled president.
“In this case, Hollande has to share the glory with Arnaud Montebourg, who has given the impression that he’s in the driver’s seat,” said Laurent Dubois, a professor at the Institute of Political Studies in Paris.
It was also a turnaround for Immelt, 58, whose bid for Alstom became a political football. After weeks of quieter behind-the-scenes negotiations, the dash for Alstom burst back into the open last week, with both Siemens and GE pitching their plan to France’s political elite.
Siemens, nervously watching GE bulk up in Europe, enlisted the help of two Japanese partners, and sweetened the financial components of its offer. The foray was met with a lukewarm response, considered too complicated and fractured, and Siemens was forced to revise its plan just days later.
Wary of the political reaction his purchase plan had received in France, Immelt was careful to present the takeover as an alliance that would essentially extend Alstom’s capabilities rather than absorb the most attractive assets of the French manufacturer. He was guided by advisers from Lazard Ltd. (LAZ), Credit Suisse Group AG (CSGN), and Morgan Stanley (MS), alongside executives including business-development head John Flannery and country chief Clara Gaymard.
The night before Immelt was due to meet Hollande, the French president assembled a small group of ministers at his residence, including Montebourg, Prime Minister Manuel Valls and Segolene Royal, the energy minister and mother of Hollande’s four children. With the deadline for final bids on June 23 fast approaching, the group pored over their options, with Montebourg favoring an outright investment by the state.
Earlier that same day, Immelt and his team met in Paris with officials including David Azema, the head of France’s state shareholding agency, lawyer Pierre-Yves Chabert, and Arie Flack, a banker with close ties to Montebourg. Citigroup Inc. (C) also advised the government.
That was when GE presented its final offer, which was designed to take into account government demands for a more favorable carve-up of Alstom’s assets.
After Montebourg went public with France’s plan to buy a stake, the Alstom camp sprang into action to stitch together a contract by the end of the weekend. Sustained by canteen food and the latest scores from the France-Switzerland match -- the French side ended up winning 5-2 -- the project took shape. Dealmakers from Bank of America Corp. and Rothschild worked with Alstom, while HSBC Holdings Plc (HSBA) advised its board.
By Sunday, Montebourg, Immelt and Alstom CEO Patrick Kron had signed final documents at the offices of Paris law firm Bredin Prat, though a last-minute squabble with Bouygues over the price at which it would sell its Alstom stake to the state delayed an official announcement. A “long and difficult” process remains to close the transaction, Kron said today.
Siemens had already put out a terse statement after Montebourg’s revelation on June 20, saying that while it respected France’s decision, Siemens still had the better offer. GE left Alstom relying on its strategically and financially troubled transport business, and Siemens would “never” have agreed to the same plan as Immelt, CEO Joe Kaeser said in a letter to employees.
Immelt was all smiles in presenting the deal over the weekend as an unqualified win for GE. Flanked by Gaymard -- who was sporting a bright red coat -- Montebourg, in a casual jacket, Kron, and Immelt shook hands and grinned as the parties signed the contract. Underscoring the friendly mood, there wasn’t a tie in sight.
Yet Immelt also hinted that the 120-year-old American company had met a potent adversary in Montebourg, a lawyer by training who has been in politics since 1997. In an interview with the Journal de Dimanche newspaper, Immelt was asked if he’d hire the minister.
“I don’t think so,” Immelt responded. “But he’s a peerless negotiator.”
To contact the reporters on this story: Matthew Campbell in London at email@example.com; Helene Fouquet in Paris at firstname.lastname@example.org; Francois de Beaupuy in Paris at email@example.com