Siemens-MHI make move for Alstom, wind is definitely out

Jun 17, 2014 - As expected, Alstom SA’s (EPA:ALO) wind turbine business was left out of the acquisition offer by Siemens AG (ETR:SIE) and Mitsubishi Heavy Industries Ltd (TYO:7011), or MHI, for parts of the French company.

The pair presented their proposal yesterday, aiming to counter US conglomerate General Electric Co’s (NYSE:GE) binding bid worth a total of USD 16.9 billion (EUR 12.5bn) for Alstom’s thermal, renewables and grid operations. The only renewable energy element in the Siemens-MHI offer is the Japanese heavy machinery maker’s plan to take a 20% stake in Alstom’s hydropower division.

More specifically, MHI wants to form three joint ventures with Alstom, through which the Japanese company will take 40% in the target’s steam and nuclear operations, and 20% in its grid and hydropower divisions. MHI calculates that it will pour EUR 3.1 billion (USD 4.2bn) in cash into Alstom through the proposed deals. The suitor is also planning to take a stake of up to 10% in the French company. Siemens, on the other hand, is offering EUR 3.9 billion in cash for all of Alstom’s gas operations, including related service agreements. The proposal comes with a three-year job guarantee offer in France and Germany for the transferred business. The German engineering major also plans to partner with Alstom to “create a European rail champion for the world market”.

In the press release, Siemens and MHI pointed out that the transactions proposed by them will “preserve Alstom’s current perimeter in almost all its activities”, enhance its position as a diversified global player in both energy and transport, and help improve its financial structure. The company will also remain a major French listed group.

(USD 1 = EUR 1.356)

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