Illustration 60886103 / Kheng Ho To / Dreamstime
Illustration 60886103 Kheng Ho To / Dreamstime
60886103 / Kheng Ho To / Dreamstime
60886103 / Kheng Ho To
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Hitachi and Mitsubishi Heavy Industries May Join Siemens to Counter GE Bid for Alstom

June 12, 2014
Siemens and Mitsubishi said in a release that they would decide by next Monday, June 16, whether to go forward with a bid for Alstom. GE extended its deadline for the offer to June 23 so French officials can settle their concerns.

The courtship of French power and rail conglomerate Alstom begun by General Electric Co. (GE) with a $17 billion bid in late April continues to draw interest from rival industrial manufacturers. The latest twist has Siemens AG considering a joint bid with Japan’s Mitsubishi Heavy Industries (MHI) and possibly Hitachi Ltd. to acquire parts of Alstom.

Hitachi said Thursday that it would collaborate with MHI in a possible bid for the energy assets of Alstom, which makes steam and gas turbines and electric transmission grid equipment. Mitsubishi and Siemens announced Wednesday that they were weighing a joint bid for parts of Alstom.

Alstom’s board of directors tentatively approved the $17 billion bid from GE for Alstom’s energy divisions, but officials of the French government have objected to the acquisition of what they consider strategic assets by a company from outside Europe. In subsequent discussions, GE committed to add 1,000 jobs in France, which was said to improve France’s opinion of GE’s offer, and GE has intimated that it’s willing to make additional concessions if necessary. GE extended its deadline for the offer to June 23 so French officials can settle their concerns.

GE’s bid for Alstom’s power generation and transmission business would leave Alstom as a stand-alone rail company. Siemens has suggested trading its own rail assets as partial payment for Alstom’s energy division, which would create larger European competitors in both businesses — a German power giant and a French rail giant.

With the addition of Mitsubishi, one option being discussed, according to Bloomberg.com, would have MHI buy Alstom’s steam turbine and grid business and Siemens buy the gas turbine operations. Such a move might alleviate some regulatory concerns but also would likely disrupt some synergies among Alstom’s turbine businesses.

Siemens and MHI said in a release that they would decide by next Monday, June 16, whether to go forward with a bid.

“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,” Shunishi Miyanaga, president and CEO of Mitsubishi Heavy Industries, said in a release.

Siemens, MHI and Hitachi have worked together in the past, most recently with a joint venture announced in May combining the firms’ offerings for the metals industry. In that case, an existing MHI venture with Hitachi as an equity partner, named Mitsubishi-Hitachi Metals Machinery, Inc. was integrated into the venture with MHI holding the majority stake.

MHI also has existing ties with the French energy industry. French nuclear reactor maker Areva SA has a joint-venture with the Japanese company for design and marketing of mid-sized nuclear reactors.

The two Japanese companies recently integrated their thermal power businesses in a joint venture, saying they needed greater scale to compete with the likes of GE, Alstom and Siemens on a global basis. The venture, called Mitsubishi Hitachi Power Systems Ltd., was announced in November 2012.

Hitachi and GE also have an alliance to build nuclear generating equipment, a partnership Hitachi power systems executives said would not be affected if GE and Hitachi end up on opposite sides of a bidding war for Alstom.

The role of the French government will be pivotal to the outcome of this consolidation drama. Although there were initial indications that the government favored a European solution led by Siemens, it’s not clear how an offer that involves splitting Alstom apart among three rivals would be received. GE executives and top negotiators are expected to meet with French officials over the next few days while Siemens, Mitsubishi and Hitachi make their decision.