France’s Takeover Law Hampering GE-Alstom Deal

General Electric sends in top executive to salvage the acquisition deal with Alstom, after the French government gives itself the power to block the GE-Alstom deal

General Electric Company (GE) is facing major roadblocks in its $17 billion bid to acquire the energy business of Alstom SA (ALSMY). The decree issued by the French government late Wednesday has given the administration the power to veto deals involving foreign investments in any sector considered to be strategic to France, such as transport, energy, and water.

The new decree is an extension of a law passed in 2005 that gave the French government the power to block deals in defense and other industries. It now requires foreign acquirers to gain approval from the economy minister for any acquisition. Unfortunately for GE, which is the largest industrial conglomerate in the world by market capitalization, the French economy minister, Arnaud Montebourg, is an advocate of government intervention in corporate affairs. He has been opposing GE’s bid for Alstom’s energy businesses. Montebourg sees Alstom as a symbol of national pride, and the government had rescued the high-speed TGV maker from a buyout in 2004 as well. He has been opposing the GE-Alstom deal since the start, and last month had called in Alstom’s CEO Patrick Kron when the CEO returned from the US after finalizing the deal to ask why the French economy minister was not informed of the

 

Yet, the French government sold Peugeot out to the Chinese to save a firm that could no longer compete with its rivals. The government would rather sell the business to a Chinese firm rather than allow for retrenchments and restructuring in order to make the company competitive again. The French government is such a hindrance to business success. Politicians should stick to politics.