France boosts veto rights over foreign takeovers

The French government will have a greater say over investments from abroad after granting itself new powers to veto takeover bids from foreign companies. The move comes just as US giant General Electric is battling to take over French group Alstom.

France boosts veto rights over foreign takeovers
The French government has boosted its powers of veto over foreign takeover bids. Does that spell bad news for General Electric? Photo: Patrick Kovarick/AFP

The government in Paris gave itself new powers of veto over foreign industrial takeover bids, which will allow it to control the fortunes of French giant Alstom, a current target.

The new rules, which could be applied to block the attempts of US General Electric or Germany's Siemens to take over Alstom's energy arm, were published in the official journal and will come into effect on Friday.

France’s finance minister Michel Sapin justified the move saying the state plays a “fundamental role in protecting the strategic interests of France. The public authority must have a say,” he said.

This is true in France as it is true in any other country" seeking to safeguard national interests, he said.

The powers will cover the key sectors of energy, transport, water, health and telecoms.

"The choice we have made, with the prime minister (Francois Hollande) is the choice of economic patriotism," Economy Minister Arnaud Montebourg told newspaper Le Monde.

"These protective measures on France's strategic interests are a renewal of our powers," he added.

Under the new rules, investments by foreign groups, whether European or not, would be submitted for authorisation to Montebourg.

SEE ALSO: Alstom intervention by French government is all 'noise'

The minister would then consider certain factors, including the sustainability of the proposal, the infrastructural implications, and the preservation of certain "indispensable skills" and whether the national interest is satisfied.

Permission would then be granted provided that the company meets certain commitments.

There will also be the possibility of an appeal to France's highest administrative court, for companies unhappy with the decision.

The new system will thus extend the strategic state controls already applicable to areas of national defence, such as armaments as well as information technology and gambling.

This notion of government permission is central to the French system.

It is not alone in seeking some protection for its key industries.

The Committee on Foreign Investment in the United States is a federal panel that reviews foreign investment projects in the United States as regards implications for "national security".

The situation at French industrial giant Alstom is currently at the fore of the government's industry policy.

When it emerged that talks for Alstom to sell its energy division to GE were at an advanced stage, the French government acted quickly, and with success, to encourage Siemens to outline a counter proposal.

That is an alternative strongly favoured by Montebourg, who is an outspoken defender of national patriotism towards French businesses.

The board of Alstom has said that it will decide by the end of May which of the two offers it prefers, although it has already signalled that it prefers the GE offer of €12.35 billion ($17.0 billion) for its energy activities.

The GE offer is the only firm proposal so far.

However France's Energy Minister Segolene Royal on Wednesday came out in favour of a takeover offer for Alstom's energy division by General Electric, in defiance of Montebourg.

She also asked the question "why do we want systematically to make foreign investment go away?"

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US giant GE to pay France €50 million after creating just 25 jobs out of 1,000

The French government announced Tuesday that US industrial conglomerate General Electric will pay €50 million ($57 million) after falling short of its goal of creating 1,000 new jobs in the country.

US giant GE to pay France €50 million after creating just 25 jobs out of 1,000
Alstom employees protest in front of the France's Ministry of Finance in Paris. Photo: AFP

GE had pledged to create the jobs by the end of last year as part of its 2015 purchase of the power and electrical grid businesses of France's Alstom.

But shortly after closing the deal GE unveiled a series of job cuts across Europe as slumping oil and gas prices crimped demand for its heavy-duty turbines and other equipment.

The company had already warned last year that it wouldn't meet the target, though the new CEO Larry Culp confirmed in October that GE would “fulfil its commitments.”

It had promised to pay €50,000 for every job not created over the three-year period.

The French finance ministry said after a meeting with GE officials Tuesday that the firm had created just 25 new jobs overall, meaning it would pay €50 million into an industrial development fund.

“GE underscored the significant of its continual investments in France during the period, and noted that despite the particularly difficult business climate, the group had done its utmost to create jobs,” the company said in a statement.

It pointed to a $330 million investment in offshore wind turbines in France announced last year, which it expects to eventually create 550 new jobs.

But union sources said last month that GE was planning to cut nearly 470 jobs, at its Alstom Power Systems GE Energy Power Conversion units.

Under Culp the company has been trying to get its power operations on more solid financial footing, with plans to cut costs further and reduce debt.

Last week it posted a $574 million profit for the fourth quarter, a welcome turnaround from the $11 billion loss a year earlier.