Siemens, Mitsubishi joins forces to woo Alstom

(MENAFN- AFP) The battle for Alstom's energy assets intensified on Wednesday with Germany's Siemens joining forces with Japan's Mitsubishi to draw up a bid for the French 'national jewel'.

The announcement by the German-Japanese giants however failed to gain traction with the French group, with a source close to Alstom saying it would effectively mean the company's break-up.

Siemens had been going head to head against GE for Alstom's energy assets.

But on Wednesday, the German giant and Mitsubishi Heavy Industries announced that they have "joined forces in evaluating a potential proposal for certain assets of the French multinational conglomerate Alstom in order to strengthen the future position of Alstom, MHI and Siemens."

They added that they would make a decision on whether to submit an offer by June 16.

According to a source close Alstom, Siemens and Mitsubishi are planning to propose to form two entities following the takeover -- one comprising of Siemens and part of the Alstom assets and the other made up of Mitsubishi and the remainder of Alstom's energy assets.

Another source closed to the French group however said Alstom "is sceptical and shocked" by the planned bid.

"It would be a dismantling" of the group, the source said, adding that it "is not a solution for (Alstom's) problems".

The company considers that it does not have the economies of scale in the energy business as it is too small on the world market for power-generating turbines. It is also battling a European slump in energy demand.

Alstom favours GE's bid, although it has said it would treat any offer by Siemens fairly.

- Political opposition in France -

However, GE's $17 billion bid has run into political opposition in France.

The French government views Alstom as a firm of national strategic importance and is concerned about safeguarding jobs as it battles record unemployment and declining industrial competitiveness.

Alstom is one of France's biggest private sector employers with about 18,000 staff nationwide.

Seeking to allay any fears about possible layoffs arising from a deal, GE promised late May to create 1,000 jobs in France.

Alstom's energy unit, which builds generators, turbines and transmission systems and would complement GE's own power industry division, accounts for 70 percent of Alstom's business.

Once the energy unit, including its nuclear energy activities, has been sold, Alstom would be left with the railway equipment division that manufactures France's prized TGV high-speed trains.

The French government will unlikely be enthusiastic about the latest turn despite having encouraged Siemens to look at taking over Alstom and create a European energy giant, said analyst Christopher Dembik at Saxo Banque.

"When you look at the offer in detail you are convinced it will mean the complete dismantlement of Alstom which the government fears," he said.

"Such an offer has two problems: first the question of control of the nuclear activities and then we are far from the famous Franco-German energy giant..." he added.

In the statement on Wednesday, Siemens chief executive Joe Kaeser said it "appreciates MHI's commitment to join our efforts and I do look forward to working together with MHI to create a long-term oriented solution for Alstom, MHI and Siemens".

His counterpart at Mitsubishi, Shunishi Miyanaga, said: "MHI has been invited by Siemens to join forces and we firmly believe that we can substantially contribute to a partnership solution for Alstom which will create value for all parties involved, including the country of France".

Alstom told AFP it "still has not received any firm offer" from the German group, while that of GE is on the table until June 23.

Alstom is a privately owned company, but depends heavily on contracts from the French government which orchestrated a rival offer from Siemens when it learnt that the company seemed close to a deal with the US group.

Alstom faces financial strains and had already put part of its rail activities up for sale.