World Bulletin/News Desk
The European Commission warned France on Thursday on resorting to protectionism over a new French law which will allow the government to approve or veto foreign takeovers of “strategic” sectors.
The EU comission is set to review the new law to see if it is in line with EU rules and to make sure it does not amount to protectionism.
"The law will be examined very thoroughly against the backdrop of European legislation," said Michel Barnier, EU Finance Markets Commissioner.
It could be a "possible limitation to the free movement of capital", he added.
The French new law, seen by French Industry Minister Arnaud Montebourg as an act of "economic patriotism", might become a roadblock to General Electric's $17 billion bid for Alstom's energy assets – one of France’s largest engineering firms.
The partly state-owned Alstom's market is valued at about 8.3 billion euros ($11.5 billion) and has investments worldwide. Between 2012 and 2013, Alstom claimed to have annual sales of 20.3 billion euros and employed approximately 93,000 people in around 100 countries.
In 2004, the French government increased its share in Alstom to 21 percent to help the company, which was then in a difficult financial position.
Alstom’s energy division makes up to 70 percent of the company’s total profit and employs nearly 18,000 people.
The new law, which is an extension of a 2005 law relating to defense, covers energy, water, transport, telecommunications and the health sector.
Minister says wants alliances, not takeovers
The government gave itself the power to block takeovers in "strategic" sectors on Thursday, throwing up a potential roadblock to U.S conglomerate General Electric's $16.9 billion bid for Alstom's power business.
The government has criticised GE's bid, which has the backing of the French engineer's board, favouring an alliance between the companies rather than a straight sale that would leave Alstom with just its smaller transport business.
It also wants Alstom to consider an alternative proposal for an energy and transport asset swap with Germany's Siemens to create two strong "European champions".
"We are not for sale. France is not for sale," Montebourg said, interviewed on RMC radio. "We favour alliances, not takeovers... We are not prey, especially in such strategic areas."
"An alliance can be done with General Electric. It's not the case right now, but that can evolve."
Montebourg said he would meet GE executives on Friday and Alstom union representatives next week to discuss the future of the company, which was bailed out by the French government a decade ago and has strongly relied on state orders for its trains and power turbines.
Alstom has given Siemens until the end of the month to decide whether to make a formal rival offer before it enters exclusive talks with GE.
Montebourg cited CFM, which makes jet engines and is co-owned by GE and Snecma, a unit of French aerospace group Safran, as an example of how a deal could work, calling it "a brilliant French-American success".
GE has also been citing the venture's success in an attempt to convince French leaders of its goodwill.
"Our strategy is no to dismembering, yes to alliances," Montebourg said, adding he had explained this preference to GE Chief Executive Jeff Immelt.
He also pointed out that he had not stepped in last year when French advertising company Publicis announced a merger of equals with U.S. rival Omnicom. The Publicis-Omnicom deal has since collapsed due to a battle for control.
Montebourg said the government would not let domestic companies be "dismembered, chopped up into pieces and devoured" and did not rule out taking a stake in Alstom as part of an effort to secure its future.
He noted that French state lender BPI had 3,000 stakes in companies and state fund APE had 71 stakes for a portfolio worth 110 billion euros ($150.88 billion).
"We are used to having a sovereign fund that intervenes in companies' capital. Not ruling that out is I think a good way of working," he said.
Steve Bolze, the president of GE's power unit, is among the executives set to meet Montebourg. A spokesman for GE France declined to comment on what Montebourg said and what would be discussed during the meeting.Güncelleme Tarihi: 16 Mayıs 2014, 15:17