PARIS, June 22 — General Electric Co is moving closer to its biggest acquisition ever, a US$17 billion (RM54 billion) deal for Alstom SA’s energy assets, after the French company’s board approved the offer.

The companies announced an agreement yesterday as talks continued for France to buy a 20 per cent stake in Alstom from shareholder Bouygues SA, a condition set by the state to back GE’s purchase. The government and Bouygues are near an accord, said two people familiar with the matter who asked not to be identified because the details are private.

GE prevailed over a Siemens AG counterproposal and initial French opposition that triggered a sweetened offer this week. GE is buying Alstom’s gas turbine operations and creating joint ventures in the steam turbine, renewable energy and electrical- transmission businesses, while the French company gets GE’s rail-signalling operations for US$825 million.

“We will now move to the next phase of the Alstom alliance,” Chief Executive Officer Jeffrey Immelt said in a statement. GE predicted a 2015 closing and said the valuation hadn’t changed since it made a formal offer on April 30.

Alstom said the sale proceeds will help bolster its train, metro and signalling business; pay down debt; return cash to shareholders; and invest about €2.5 billion (RM10.9 billion) in the ventures being formed with Fairfield, Connecticut-based GE in steam turbines and renewable-energy and power-transmission gear.

‘Very complementary’

“The combination of the very complementary energy businesses of Alstom and GE would create a stronger entity,” Alstom CEO Patrick Kron said in a statement.

Based in the Paris suburb of Levallois-Perret, Alstom built France’s power grid and makes the high-speed TGV trains as well as the generators that produce most of the nation’s electricity. That history has helped cement its status as a local industrial icon, and spurred the government’s pursuit of an equity stake.

Messages left for spokesmen for the government and Paris- based Bouygues, a construction company, about their discussions weren’t returned.

France’s stake in Alstom will be acquired at market prices from Bouygues, Economy Minister Arnaud Montebourg said on June 20. He said the state would block the GE deal if France couldn’t reach an agreement on the investment.

Alstom’s deadline

“It’s a prerequisite that France takes 20 per cent of the capital,” Montebourg said. Alstom closed June 20 at €28, valuing the company at €8.64 billion. Bouygues’s current stake is about 29 per cent, which the French builder values at €34 per share.

The French government has €2.7 billion in cash available after the sale of shares in Safran SA, Airbus Group NV and Aeroports de Paris, Montebourg was quoted as saying by French newspaper Le Parisien today.

Alstom’s board had set a deadline of tomorrow to consider offers for the energy business, with Munich-based Siemens also in the running until the government said that it favoured GE.

French law permits state intervention to block acquisitions of companies deemed to be of national importance. In 2005, France passed an anti-takeover decree amid speculation PepsiCo Inc planned to bid for dairy-products maker Danone. GE’s attempt to buy US rival Honeywell International Inc, announced in 2000, collapsed when GE refused to make concessions sought by European Union officials.

Immelt’s visits

For Immelt, securing France’s backing marks a victory for his lobbying campaign to soothe local political concerns. Officials called GE’s first proposal unacceptable, with Montebourg expressing a preference for a so-called European solution and strengthening the government’s ability to insert itself into acquisitions.

GE responded by revising the terms and sending senior executives led by Immelt to visit government officials. Immelt met with French President Francois Hollande and made a rare appearance last month by a US CEO before the National Assembly.

GE refined its offer by proposing alliances in nuclear technology and rail, and adding safeguards to its pledge to create 1,000 local industrial jobs. The sale of GE’s rail-signalling operations, to be added to Alstom’s transport business, was one of the concessions in the updated bid.

“The state has succeeded in keeping Alstom French,” Montebourg said on June 20.

Energy assets

GE rose 0.2 per cent to US$26.97 at the close in New York on June 20. Siemens gained 0.3 per cent to €100.25, while Bouygues slid 1.3 per cent to €32.28.

Siemens sought Alstom’s energy assets to expand in Europe and keep its US rival at bay. Working with Mitsubishi Heavy Industries Ltd and later joined by Hitachi Ltd, the German company put together a counterproposal and sought to wrest away GE’s prize.

A final offer, made hours before Montebourg endorsed GE’s plan, valued Alstom’s energy assets at €14.6 billion.

CEO Joe Kaeser reiterated his view that Siemens had a superior bid while saying the company would accept France’s wishes. “We respect and understand the political interest of the government in the field of energy technology,” Kaeser said in a statement. — Bloomberg