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Fast Money & Foreign Objects
Arnaud Montebourg, France’s industry minister, had a lot on his mind while he mingled at a state dinner at the White House.
It was the evening of Feb. 11, and a delegation of politicians and businesspeople was gathered to honor French President Francois Hollande -- an event reserved for the U.S.’s most important partners. Over caviar and quail eggs, conversation veered from building links between Silicon Valley and France’s tech industry to trade talks, and, more juicily, Hollande’s public split with Valerie Trierweiler, his longtime partner.
Just hours earlier, Clara Gaymard, the head of General Electric Co.’s operations in France and part of Hollande’s Washington entourage, had quietly pulled Montebourg aside at the U.S. Chamber of Commerce, telling him that GE, the 122-year-old U.S. industrial conglomerate, was interested in France’s Alstom SA, people familiar with the discussions said.
Gaymard, 54, assured the minister that GE would keep the government informed of any discussions, which were at a very early stage, and Montebourg didn’t tell his staff about the brief conversation.
Secret Negotiations
Just more than two months later, Fairfield, Connecticut-based GE formally announced a $17 billion bid for Alstom’s energy assets, accounting for almost three-quarters of its revenue. That transaction was the result of months of negotiations that were kept secret from the French government and many of Alstom’s own executives, followed by a frantic attempt to derail the deal by rival Siemens AG.
This story is the result of on- and off-record interviews with more than a dozen people with knowledge of events around the GE-Alstom deal. Officials at Siemens, Alstom and the French government declined to comment. GE Chief Executive Officer Jeffrey Immelt, 58, said that Alstom, based in the Paris suburb of Levallois-Perret, initiated the discussions and that talks progressed from a meeting in February.
Back in Paris from the Hollande visit, Montebourg, 51, quizzed Alstom CEO Patrick Kron about possible partnerships. The two men met routinely, and Kron, 60, liked to use his face time with the minister to lament his dealings with SNCF, the national railway, or seek help on exports. He was less forthcoming when the talk turned to possible strategic alliances, even inviting Montebourg to make his own suggestions.
Trouble Ahead
Kron’s nonchalance hid what was taking place. Unbeknownst to the French government, Alstom had advanced in its discussions with GE about a transaction that aimed to sell the bulk of the business to the U.S. competitor.
Alstom had approached GE about a possible deal before the White House event. Kron andImmeltmet at a casual dinner that month to discuss the proposal. GE took a few weeks to study it, before engaging with more intensity in mid-March.
Immelt dispatched a team from his energy group to review Alstom and make sure any issues weren’t operational, and that it could be run GE’s way. Once he received positive feedback, Immelt began working on the finer points of a possible deal.
Bouygues SA, the construction and communications company that owns about 29 percent of Alstom, also played a key role in the overtures to GE, and was supportive from the early stages. CEO Martin Bouygues’s conglomerate had been struggling to finance expansion amid a price war in the French mobile-phone market, and was looking for new sources of cash. A representative for Bouygues declined to comment.
Secret Meeting
On April 23, Kron was in Chicago for a clandestine meeting at the Peninsula Hotel with Immelt, who was hosting GE’s annual shareholders’ meeting in the city. The aim was to hammer out final details for GE’s largest-ever acquisition, which would help the U.S. company build a major bridgehead in continental Europe, home to Munich-based Siemens, the undisputed engineering champion in the region.
The two men agreed on the broad outlines of a transaction, which they planned to announce as soon as Monday, April 28, after Alstom had a chance to brief government ministers and its own board. While working through last-minute issues at the offices of Sidley Austin LLP, a law firm in Chicago, Kron and his advisers learned that Bloomberg News was reporting that GE was in talks with Alstom on a deal.
The executive knew this revelation would mean a frosty reception back home. The report had derailed his plan for an orderly process: telling the government first and then the public.
Nasty Surprise
With jobless claims at an all-time high and his approval rating below 20 percent, Hollande’s government was hyper-sensitive to any suggestion of a deal that could cost French jobs, and Kron hadn’t yet had time to make his pitch to ministers.
Pulled by the government from near bankruptcy a decade ago, Alstom had fostered a close relationship with the state over the years. As a major provider of industrial infrastructure -- from trains to trams to nuclear gear and power transformers -- the government kept a close eye on Kron and his strategy.
Thousands of miles away the next morning in the French capital, Montebourg received a 7:15 a.m. text message from an aide. A phone call followed, both informing him of the Bloomberg report. Montebourg first dismissed the story, saying Alstom had been the subject of takeover rumors for years. What’s more: He had Kron’s assurance that there was no alliance. The aide told him that this time it was serious.
Feeling Tricked
Montebourg’s staff began a frantic search for Kron. Calls to his mobile phone went straight to voicemail. Only later were they able to reach his private secretary, who told them the executive was in the air. A sleepy Gaymard, Immelt’s representative in France, was awoken in the U.S. and promised to rush to Paris the next day.
When Kron finally touched down at Le Bourget, the private-jet airport outside Paris, he was ordered to make his way straight to Bercy, the hulking Modernist complex on the banks of the Seine where Montebourg has his offices. The two men met at the minister’s office on the third floor with views of the Notre Dame cathedral, where Kron endured a frank discussion with Montebourg about his business dealings with GE.
Montebourg, who had just been promoted in a cabinet shuffle, taking on responsibility for the broader portfolio of economics, felt he’d been misled. Kron had “solemnly assured” the government that he had no projects for transactions, and finding out via the press was unacceptable, Montebourg said.
Before markets opened on April 24, Alstom issued a short statement saying that while it constantly reviewed its strategic options, the company had not been informed of any bid. When the shares started trading, they jumped 16 percent.
How GE’s Alstom Talks Almost Killed $17 Billion Deal - Bloomberg
It was the evening of Feb. 11, and a delegation of politicians and businesspeople was gathered to honor French President Francois Hollande -- an event reserved for the U.S.’s most important partners. Over caviar and quail eggs, conversation veered from building links between Silicon Valley and France’s tech industry to trade talks, and, more juicily, Hollande’s public split with Valerie Trierweiler, his longtime partner.
Just hours earlier, Clara Gaymard, the head of General Electric Co.’s operations in France and part of Hollande’s Washington entourage, had quietly pulled Montebourg aside at the U.S. Chamber of Commerce, telling him that GE, the 122-year-old U.S. industrial conglomerate, was interested in France’s Alstom SA, people familiar with the discussions said.
Gaymard, 54, assured the minister that GE would keep the government informed of any discussions, which were at a very early stage, and Montebourg didn’t tell his staff about the brief conversation.
Secret Negotiations
Just more than two months later, Fairfield, Connecticut-based GE formally announced a $17 billion bid for Alstom’s energy assets, accounting for almost three-quarters of its revenue. That transaction was the result of months of negotiations that were kept secret from the French government and many of Alstom’s own executives, followed by a frantic attempt to derail the deal by rival Siemens AG.
This story is the result of on- and off-record interviews with more than a dozen people with knowledge of events around the GE-Alstom deal. Officials at Siemens, Alstom and the French government declined to comment. GE Chief Executive Officer Jeffrey Immelt, 58, said that Alstom, based in the Paris suburb of Levallois-Perret, initiated the discussions and that talks progressed from a meeting in February.
Back in Paris from the Hollande visit, Montebourg, 51, quizzed Alstom CEO Patrick Kron about possible partnerships. The two men met routinely, and Kron, 60, liked to use his face time with the minister to lament his dealings with SNCF, the national railway, or seek help on exports. He was less forthcoming when the talk turned to possible strategic alliances, even inviting Montebourg to make his own suggestions.
Trouble Ahead
Kron’s nonchalance hid what was taking place. Unbeknownst to the French government, Alstom had advanced in its discussions with GE about a transaction that aimed to sell the bulk of the business to the U.S. competitor.
Alstom had approached GE about a possible deal before the White House event. Kron andImmeltmet at a casual dinner that month to discuss the proposal. GE took a few weeks to study it, before engaging with more intensity in mid-March.
Immelt dispatched a team from his energy group to review Alstom and make sure any issues weren’t operational, and that it could be run GE’s way. Once he received positive feedback, Immelt began working on the finer points of a possible deal.
Bouygues SA, the construction and communications company that owns about 29 percent of Alstom, also played a key role in the overtures to GE, and was supportive from the early stages. CEO Martin Bouygues’s conglomerate had been struggling to finance expansion amid a price war in the French mobile-phone market, and was looking for new sources of cash. A representative for Bouygues declined to comment.
Secret Meeting
On April 23, Kron was in Chicago for a clandestine meeting at the Peninsula Hotel with Immelt, who was hosting GE’s annual shareholders’ meeting in the city. The aim was to hammer out final details for GE’s largest-ever acquisition, which would help the U.S. company build a major bridgehead in continental Europe, home to Munich-based Siemens, the undisputed engineering champion in the region.
The two men agreed on the broad outlines of a transaction, which they planned to announce as soon as Monday, April 28, after Alstom had a chance to brief government ministers and its own board. While working through last-minute issues at the offices of Sidley Austin LLP, a law firm in Chicago, Kron and his advisers learned that Bloomberg News was reporting that GE was in talks with Alstom on a deal.
The executive knew this revelation would mean a frosty reception back home. The report had derailed his plan for an orderly process: telling the government first and then the public.
Nasty Surprise
With jobless claims at an all-time high and his approval rating below 20 percent, Hollande’s government was hyper-sensitive to any suggestion of a deal that could cost French jobs, and Kron hadn’t yet had time to make his pitch to ministers.
Pulled by the government from near bankruptcy a decade ago, Alstom had fostered a close relationship with the state over the years. As a major provider of industrial infrastructure -- from trains to trams to nuclear gear and power transformers -- the government kept a close eye on Kron and his strategy.
Thousands of miles away the next morning in the French capital, Montebourg received a 7:15 a.m. text message from an aide. A phone call followed, both informing him of the Bloomberg report. Montebourg first dismissed the story, saying Alstom had been the subject of takeover rumors for years. What’s more: He had Kron’s assurance that there was no alliance. The aide told him that this time it was serious.
Feeling Tricked
Montebourg’s staff began a frantic search for Kron. Calls to his mobile phone went straight to voicemail. Only later were they able to reach his private secretary, who told them the executive was in the air. A sleepy Gaymard, Immelt’s representative in France, was awoken in the U.S. and promised to rush to Paris the next day.
When Kron finally touched down at Le Bourget, the private-jet airport outside Paris, he was ordered to make his way straight to Bercy, the hulking Modernist complex on the banks of the Seine where Montebourg has his offices. The two men met at the minister’s office on the third floor with views of the Notre Dame cathedral, where Kron endured a frank discussion with Montebourg about his business dealings with GE.
Montebourg, who had just been promoted in a cabinet shuffle, taking on responsibility for the broader portfolio of economics, felt he’d been misled. Kron had “solemnly assured” the government that he had no projects for transactions, and finding out via the press was unacceptable, Montebourg said.
Before markets opened on April 24, Alstom issued a short statement saying that while it constantly reviewed its strategic options, the company had not been informed of any bid. When the shares started trading, they jumped 16 percent.
How GE’s Alstom Talks Almost Killed $17 Billion Deal - Bloomberg