Mitsubishi Heavy, Hitachi Eye Global Clout With Alstom Bid
Mitsubishi Heavy Industries' involvement in Siemens' bid for the power assets of France's Alstom fits in with the Japanese company's plans to build a global presence after a recent major reorganization of its business.
Mitsubishi Heavy President Shunichi Miyanagi said last month the company wants to accelerate its global expansion through mergers, acquisitions and alliances. It has been paying down debt and cut its debt-equity ratio in half between 2010 and last year, while building up its cash reserves to almost $4 billion.
The company also completed a major reorganization, consolidating nine business divisions into four so-called domains from the business year that started in April.
Hitachi Ltd has said it is interested in joining Mitsubishi Heavy's bid. Under their proposal, they would merge their steam-turbine businesses with those of Alstom, but the real prize would be access to Alstom's clients across Europe.
The Japanese firms, which have little presence in the region, want to sell them other technologies such as clean-coal power stations and nuclear equipment.
Siemens is due to present an offer by Monday ahead of a June 23 cut-off date set by General Electric for GE's 12.4 billion euros ($16.88 billion) bid for all of Alstom's energy arm, which includes its thermal power, renewable power and grid businesses.
Mitsubishi Heavy's Miyanagi is also in Paris to present the offer, according to sources.
Mitsubishi Heavy said in a statement Monday that various options were being considered, but a decision had not been made.
Siemens and Mitsubishi are including a cash element of roughly 9 billion euros, according to sources close to the bidders.
Tying up with Alstom would give Mitsubishi Heavy access to European markets, said Tom O'Sullivan, founder of independent energy consultancy Mathyos Japan.
“They are weak in Europe, but strong in Asia,” O'Sullivan said. “This would given them access to Alstom's clients.”
Alstom's steam turbines account for more than 20 percent of global installed capacity, according to the French company's website. More than 30 percent of nuclear power stations use Alstom steam turbines, the website says.
Mitsubishi Heavy recently completed a tie-up with Hitachi that put their thermal power business together in a bid to secure more global contracts.
Hitachi is planning the construction of new nuclear reactors in the UK after buying the Horizon nuclear power project from E.On and RWE.
PUSH FOR EXPORTS
As the race to acquire Alstom power business enters a crucial week, Mitsubishi Heavy's move ties in with the push by Japan's prime minister, Shinzo Abe, for more exports of Japanese coal technology and nuclear equipment to boost growth.
Abe has regularly touted Japanese prowess at building more efficient coal plants that help reduce emissions, including technology developed by Mitsubishi Heavy.
He is also pushing for domestic companies to build their first nuclear plant overseas as Japan moves away from atomic energy following the Fukushima disaster in 2011.
In the move being considered by Siemens and Mitsubishi, the German firm would acquire Alstom's gas turbine business while the Japanese group would inject cash and industrial assets into a joint venture in steam turbines, sources said.
“Mitsubishi forming an alliance with Siemens improves Siemens' offer,” French Finance Minister Michel Sapin said in an interview broadcast on Europe 1 radio and news channel iTele on Sunday. “I think that GE is also going to improve its offer.”
Alstom is privately owned, but the French government has taken an active role in the talks. It views the group's transport and energy activities, notably in nuclear power, as strategic and is keen to preserve jobs with unemployment stuck above 10 percent.
The French government has already secured a pledge from GE to create 1,000 new jobs in France within three years of a deal and Sapin said he expected the U.S. conglomerate to improve its offer further.
Mitsubishi and the French state would take equal stakes in Alstom, acquiring part of the 29 percent holding of French group Bouygues, union representatives said after meeting French Economy Minister Arnaud Montebourg.
This could involve French state bank BPI acquiring a stake in Alstom alongside Mitsubishi, the Wall Street Journal reported on Sunday. A source familiar with the situation said BPI was “ready to be involved in any scenario”, including with Mitsubishi or GE.
A Bouygues spokesman said the group had not been approached by any party regarding a sale of its stake in Alstom, adding: “Bouygues wishes to remain a long-term shareholder in Alstom with a 29.3 percent stake.”
Bouygues would support the proposal recommended by the Alstom board, the spokesman said.
In a second step separate to a turbine deal, Siemens is also proposing to combine its rail activities with Alstom's, sources said. The French government has actively lobbied for this, saying it would create a European rail champion.