General Electric’s bid to merge with Alstom is history repeating itself. And if GE does not engage in proper EU lobbying work this time, failure will be its destiny again, writes Andreas Geiger.
Dr. Andreas Geiger is Managing Partner of Alber & Geiger, an EU lobbying law firm.
In 2001, Honeywell and GE failed to merge due to a veto by the European Commission while the FTC had already cleared the merger in the US. At the time, Jack Welsh literally kicked in the door of the EU Commissioner for competition, Mario Monti, trying to “walk over Brussels”. In Washington DC, a company like GE would never act like that. It would – and did so at the time in the US – accompany the merger procedure not only looking at antitrust law but dealing with the political side of things as well.
Today, the prospects of the merger between GE and Alstom look difficult again. The build-up of political pressure within the European Union and the national interests of France (Alstom) and Germany (Siemens) could prevent the merger from happening. Regardless of the antitrust implications. Just for political reasons. Thus, GE’s bid might result in a similar disaster for the American company as the attempted merger with Honeywell.
Alstom is a company of symbolic value for France, building the national TGV trains, and represents French industrial capacity in the energy industry. Therefore, political attention is high. The position of the French government is important for several reasons. Firstly, the French government has a say in the merger due to the importance of Alstom for the French industry. Secondly, France is the most important purchaser of Alstom products, so its opinion would matter anyway under normal market circumstances.
Consequently, French administrations have used their possibilities and are always on the lookout for a French solution when danger looms for Alstom. But it is no secret that such a solution, like Alstom’s partly nationalization in 2004, is not a viable option in light of the French state of economy.
France has shown a strong tendency to oppose foreign firms, be it American companies like Yahoo or European firms like Enel. A particularly compelling example is the failed merger with Areva, a French company GE tried to take over in 2009. At the time, the French government refused the bid and rather split the company into several parts than giving it to GE. Taking over a French firm has thus already proven difficult.
Now political pressure is even increasing, as the German government joins the table reacting to the Siemens bid. German Vice-Chancellor Gabriel voiced his opinion to French president Hollande, who favors the idea of “European champions” in the transport sector and in the energy sector, respectively. With two important Member States of the European Union having a stake now, the future of Alstom becomes entirely political.
The suggested political deal between Siemens and Alstom to kick out GE might prove difficult under EU antitrust law. But this doesn’t mean that GE will benefit. The European Commission will then be pressured by the two largest EU member states to oppose GE as well: “If we can’t get it, they shall not either.”
For GE this will mean another painful round of negotiations, in which the European Commission puts forward severe concessions that will not be easy to swallow. This is exactly what happened in the attempted merger between GE and Honeywell. Similar to GE’s failed merger attempt with Honeywell, bundles will be a stumbling block in this instance as well. Here, especially gas and hydroelectric turbines are of interest. Analysts claim, that the merger will lead to a dominant position, so that the European Commission will have the possibility to block the deal from going through.
Proponents of the deal might say that GE has gained experience in dealing with European regulators. That is certainly true, but GE does not fare well with European political pressure. Any past attempts to successfully persuade European politics to accept its bids have been futile. Moreover, the prominence of this merger puts high pressure on the Hollande administration to find a solution in the French interest.
If France does not succeed in finding a way to block the merger during the negotiations stage, the combined political influence of Germany and France will pressure the European Commission to block the merger in its established procedures. This will result in GE’s CEO Immelt’s biggest attempted merger to fail, thus mirroring former CEO Welsh’s huge merger attempt with Honeywell breaking apart. Time to lobby.