Ambrose Evans-Pritchard: French Govt struggles on takeover

France's President Francois Hollande has the lowest approval rating in modern French history. Photo / AP

Opinion

French President Francois Hollande has rejected General Electric's takeover bid for the industrial group Alstom on "national interest" grounds, openly protecting French core industry in defiance of global market forces.

Hollande denounced GE's €12.4 billion ($19.8 billion) offer for the French manufacturer of power turbines and TGV high-speed trains as "unacceptable", even though it has been approved by the company's board.

"The role of the state is to make sure the national interest is upheld. We have sufficient means of pressure to ensure that the outcome is good for Alstom, good for French industry, and good for the diversity of energy," he said.

Economy Minister Arnaud Montebourg told GE chief executive Jeff Immelt that Alstom was a strategic priority, insisting France must preserve "technological sovereignty" over its nuclear industry.

French law gives the Government powers to demand guarantees that foreign investors do not hollow out the country's industrial core, an issue that reached fever pitch when Mittal Steel took over Arcelor in 2006.

Yet it is not clear whether France can legally stop GE in this way under EU competition law. Article 21 of the EU Merger Regulation allows governments to block takeovers if public security or the free media are threatened, but there is no broad veto for energy.

Hollande left little doubt he favours a counter offer from Germany's Siemens, which involves an asset swap that would leave France in a dominant position over high-speed railways.

"There is another offer and we'll see if it's better," he said.

The beleaguered President - suffering from the lowest approval rating in modern French history - is acutely sensitive to job losses. He told the French people to judge him on his record in "bending the unemployment curve", only to see it climb as he pushed through strict austerity measures to meet EU deficit targets without offsetting monetary stimulus. The OECD club of rich states says the jobless count will not come down until late 2015.

Yet there are other political reasons for blocking the GE bid, which effectively splits Alstom in two by taking over its turbines, nuclear facilities and power grids, but not trains. Montebourg said the takeover would lead to the "disappearance of Alstom".

"This Government was in denial at the start about the need for economic restructuring in France [to] restore cost competitiveness," said Eric Dor, from the IESEG business school in Lille. In this case there is a legitimate concern about losing decision-making centres in the energy industry, so this is mixed with the protectionist reflex."

The Government encouraged Siemens to launch a counter bid worth €10.5 billion to €11 billion, much to the irritation of Alstom's board.

Montebourg is known as France's "enfant terrible", quick to clash with multinationals over management practice, or with Brussels over austerity.

He accused steel magnate Lakshmi Mittal of "blackmail" two years ago over plans to shut down foundries in Lorraine.

Little came of Montebourg's threats to nationalise ArcelorMittal's plant, or to save the steel jobs. His bark is usually worse than his bite.