IN DEPTH: What now for Siemens?
Siemens has gained the four weeks it asked for to scrutinize Alstom’s finances and take its time to formulate a counter-bid to GE’s offer to take over the energy business of the French industrial firm for a whopping $17bn.
The interference of the French government no doubt had a great role to play in that.
Economics minister Arnaud Montebourg, for undisguised nationalistic reasons, has lobbied for a counter-bid from Munich to keep the French national industrial champion at least in European hands, and showed his annoyance over not having been informed by Alstom about what must have been months of behind-the-scenes negotiations with GE.
Montebourg even accused Alstom of lying to him.
Alstom chief Patrick Kron has been reported to be neither a friend of Germany, nor of Siemens, which has been hungrily eying its French rival for many years.
Kron has made clear that he prefers GE’s offer. Alstom’s board according to French press reports has already given its preliminary approval to the bid, but ceded Siemens the four-weeks of scrutiny to formulate a counter-bid to pacify the government in Paris.
But what could Siemens possibly gain from Alstom?
Unlike GE, Siemens already is strong in offshore wind and offshore grid connections. In onshore wind, Alstom’s Brazilian pipeline is very attractive for both Siemens and GE, but gaining a much better foothold in onshore wind in Europe as well would be a great prize for GE, which has been struggling to gain market share on the old continent.
Siemens already has a far bigger presence in onshore wind in Europe and wouldn’t really need Alstom’s assets for that purpose either.
Also, the Germans would have to sweeten GE’s bid, and likely give more concrete and long-lasting job guarantees for Alstom staff to sway its board’s – and Kron’s – opinion their way.
As the gain from a possible transaction would be minor, Siemens probably was so swift with its willingness to present a counter-offer because it has a lot to lose if GE wins.
A beefed-up GE with Alstom’s energy assets would challenge Siemens’ offshore predominance, and also threaten it in onshore wind in Europe. In turbines for fossil fuel power plants, GE would also become an even bigger competitor to Siemens, which has been making good profit in that area, in the US.
At the same time, a much smaller Alstom concentrating on transport would suddenly be awash with cash and become a larger-than-life competitor to the German company in high-speed train and urban transport technology – a sector that has caused Siemens some pain in recent years anyway.
The pressure on Siemens is immense, and comes just as chief executive Joe Kaeser next week is scheduled to present a long-awaited strategic reorientation of business divisions.
But spending a double-digit billion euro amount on assets the company doesn’t essentially need just to fend off the beefing up of a large rival doesn’t sound like good economics.