Siemens Recruits Mitsubishi to Foil General Electric Company's Buyout Plans

American and German manufacturers collide in attempt to snag assets of France's Alstom.

Jun 12, 2014 at 3:02PM

In the battle over the coveted French industrial outfit Alstom, Siemens was not about to let archrival General Electric (NYSE:GE) win without a fight. So, just as the cards seemed stacked against the German conglomerate, Siemens decided to recruit the help of the Japanese through an alliance with Mitsubishi Heavy Industries (MHI). The alliance will undoubtedly put Siemens in a better position to clear regulatory hurdles, but can it leapfrog GE's $17 billion bid? Lets look at the ins and outs of a potential deal ahead of Monday's looming deadline.

Ge Vs Siemens

Source: Flickr/Jeffrey Turner, Wikipedia.

By June 16, Siemens and MHI plan to submit a proposal to Alstom's board of directors, so right now, investors can only speculate as to what the specifics might look like. Ahead of the proposal, however, here's what the two companies had to say about a three-way deal: "[W]e 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." With that in mind, let's add a fourth party to the mix based on that last clause: French government officials.

Ironically, Siemens and MHI's Franco-friendly angle might be the only mechanism they can employ to tip the balance in their favor. It will be difficult to top the size of GE's bid, which would amount to the American manufacturer's largest in its 100-year-plus history. Secondly, GE can afford it. Alstom would be hard-pressed to find another company sitting on $57 billion in easily deployable overseas cash.

What's more is that the actual integration with GE -- despite the company's different geographies -- looks quite manageable for operations of this size because of complementary interests in the thermal, renewables, and grid businesses. To top it off, GE's CEO Jeff Immelt seems inclined to pull out all the stops to push this deal through, whether its through schmoozing with top-ranking French officials or touting his ambitious plans to create 1,000 French jobs.

Still, there are plenty of French officials who would happily turn a cold shoulder on GE as it looks to snatch up the crown jewel of France's industrial sector. The whole saga, in fact, seems to have reawakened the formerly dormant idea of protectionist sentiment in recent months. France's minister of economy, Arnaud Montebourg, even went so far as to push through a broader law that provides the government more leeway with which to deny foreign takeovers.

Exactly how this would come into play when evaluating a German-Japanese alliance versus an American interloper is unclear. What it does do, however, is give France plenty of room to maneuver according to the whims of the state. And, thus far, the state's seemed to favor stretching across its border with Germany to reaching across the pond for GE.

For perspective, I pulled together some relevant stats on the suitors who are currently involved in the contest for Alstom. I've also included my thoughts on the likely buyout strategy to be employed by Siemens and Mitsubishi Heavy Industries:

Slide

Source: Bloomberg Businessweek, Morningstar, Wikipedia.

Unlike GE's proposed all-cash bid for Alstom's power businesses, Siemens and Alstom are likely to be attracted to Alstom's transportation and energy assets. I imagine they'll enlist a different approach as well, setting the stage for an asset swap rather than forking over cash for Alstom's goods. It's also likely Siemens will divert certain assets to Mitsubishi to avoid creating a dominant industry giant (close to a monopoly) in Europe.

As I've mentioned before, a strain of disbelief exists among analysts and the media regarding Siemens intentions. Are powerful government interests dragging the German giant into the mix kicking and screaming? Considering Siemens' pending job cuts and recent $1.3 billion acquisition of Rolls-Royce assets, the answer seems to be "yes".

For now, however, the wheels are in motion for a Siemens-Mitsubishi proposal to land on Alstom's desk by Monday. Even with this new alliance, there's little reason to believe a more lucrative offer will entice Alstom's board, which has already agreed to the terms of GE's binding offer. France's bureaucrats could be a roadblock for GE, of course, but I'm not sure they're fond of scattering Alstom's assets all over the globe either. From my perspective, GE's still sitting comfortably in the driver's seat, despite the entrance of new contestants.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Isaac Pino, CPA, owns shares of General Electric Company. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers