To Foreign Firm Fury, French Consortium Emerges Victorious in Bid for AREVA T&D

To widespread international dismay and despite superior competing offers to buy AREVA’s transmission and distribution (T&D) business, the French state-owned firm has favoured a bid from a French consortium. Nuclear group AREVA has announced that it will enter into exclusive negotiations with Alstom and Schneider Electric, both of France, to sell the firm’s T&D arm. Together, the pair tabled a 4.09-billion-euro (US$6.17 billion) bid for the unit, comprising equity valued at 2.3 billion euro. Competing offers for the unit came from General Electric (GE) of the United States and Toshiba of Japan, which each submitted bids of 4.2 billion euro with associated equity valuation of 2.4 billion euro.

The French state owns around 92% of AREVA, and has ordered the firm to divest peripheral assets in a bid to raise around 11 billion euro to fund new investments including a strategy of international expansion. The T&D unit last year generated around 40% of AREVA’s profits, making the government sell-order a difficult pill to swallow for many including the company’s chief executive Anne Lauvergeon.

Je Ne Regrette Rien

The decision to side with French firms was characterised by France’s economy minister, Christine Lagarde, as a question of national solidarity that would safeguard jobs. Last September, Lagarde had assured that the sale would be "open to everyone", saying that she would be looking at "the strategy and business plan of whoever is bidding, with an eye to maintaining the operation and employment". Officially, the government has been somewhat more circumspect in its position, saying merely that it had no preference as to which way the bid went. Nevertheless, the move has resulted in notable consternation among the international firms that have submitted bids for the business unit. The Financial Times (FT) has quoted an unnamed person close to one of these bidders as saying, "they told us the bid would be judged on four criteria but it turns out there was a hidden one: You have to be French". For its part, GE diplomatically noted that it had "made a strong, competitive bid for the AREVA T&D business, addressing the financial, industrial and social aspects of the sale," and that it had, "committed to a fair and open bidding process and complied with the requirements throughout the bidding". Japan’s Toshiba meanwhile is said to be so angry as to be considering legal action.

Outlook and Implications

There is little doubt that the decision by AREVA’s management to go with the French offer will be widely interpreted as protectionist in nature and completely non-transparent in process. As for why the decision went this way, it is quite likely that there will have been a general desire to avoid a repeat of what happened in 2003 when the government okayed the acquisition of Péchiney, a French aluminium group, by Canada’s Alcan. In the event, and despite assurances from Alcan that there would be no adverse impact for the company or its staff, Péchiney’s presence in the country was subsequently decimated. The trauma of this experience may have been instrumental in prompting AREVA to close ranks with its countrymen. That said, Alstom and Schneider Electric’s plans for the T&D unit can hardly be described as benign; the pair have plans to split the unit into two halves, each focusing on a different market segment. While Alston will take on the high-tension part of the unit, Schneider intends to focus on its medium-voltage distribution side, with the overall strategy effectively splitting what is today the world’s third-largest supplier of T&D equipment. Alstom and Schneider have promised no job cuts for three years subsequent to the acquisition, but such promises can be hard to keep against a backdrop of economic weakness. As for Toshiba considering legal action, the Japanese firm appears to have a solid case, should it choose to go down that route.