GE’s Alstom bid threatened as France bolsters anti-takeover law

General Electric Co.’s $17 billion bid for Alstom SA’s energy business is in jeopardy after France gave itself the power to block foreign takeovers in industries it deems strategic.

A decree signed late yesterday by the economy and industry minister grants the French government the right to intervene in areas that include energy. The move broadens a 2005 law focused primarily on military and defense-related operations, and builds on recent criticism of the GE deal from French officials.

The new rule, which takes effect tomorrow, strengthens France’s ability to extract concessions, including improvements in jobs guarantees. GE, facing a possible competing offer for Alstom from Siemens AG that’s favored by some French officials, may be forced to raise its bid or abandon it completely, said Steven Winoker, a Sanford C. Bernstein analyst in New York.

“The French government is going to great lengths to intervene,” said Winoker, who rates GE’s stock market perform. “This particular announcement is not a positive one from GE’s perspective. At the end of the day, I think you still will have a deal, I just don’t know that it will be with GE.”

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Shares of Fairfield, Conn.-based GE fell 1.1 percent to $26.48 at 12:10 p.m. in New York. Alstom, which is also the company supplying turbines for Deepwater Wind LLC’s 30-megawatt Block Island Wind Farm project, fell 2.6 percent in Paris to 28.55 euros.

French President Francois Hollande, dealing with record unemployment and a stagnant economy, has urged GE to improve its offer, specifically to protect jobs. Economy and Industry Minister Arnaud Montebourg said he prefers a proposal by Munich-based Siemens to swap most of its rail business for Alstom’s energy assets. He told reporters today that the Siemens bid represents an alliance and characterized GE’s offer as an “absorption” of Alstom.

Curbing zeal

“If needed, the government will be able to ask specific commitments or set conditions for investments to warrant the interests of the country,” Montebourg said in a statement about the law change.

According to an internal Siemens document obtained by Bloomberg, the rule “clearly aims at curbing GE’s zeal towards Alstom.”

GE is attempting to acquire the Alstom businesses that make and service turbines and other power-plant equipment, as well as transmission network products. The offer doesn’t include Alstom’s transport business, which makes the high-speed TGV trains and accounts for less than 30 percent of sales.

“The industrial project we have presented is good for Alstom, its employees and for France,” GE said in a statement today. “Our plan is to build a global energy business with four headquarters in France and to preserve and create jobs in France.”

Steve Bolze, CEO of GE’s power and water division, was in France for several days over the past week and is scheduled to meet tomorrow with French government officials. GE said it “will continue to have open and productive discussions” with the French government.

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