Alstom shares soar on GE takeover speculation

Shares in French industrial group Alstom soared on Thursday after reports that US giant General Electric was considering a $13bn (£7.7bn) takeover of the French bullet train and energy group.

However, Alstom released a statement that said that it “is not informed of any potential public tender offer for the shares of the company.”

During the course of the afternoon it has emerged that the US group may only be interested in the energy division of Alstom, rather than making a bid for the whole company. Le Figaro reported that deal talks would "focus exclusively on the activities of the French energy group".

This would make sense as any approach would not be “for the shares of” Alstom and be in keeping with the French group’s statement. Alstom also said “The group constantly reviews the strategic options of its businesses.”

Alstom's energy division which includes gas turbines, coal , distribution and offshore wind activities account for over 70pc of total turnover of Alstom.

There would also be significant strategic rationale for GE acquiring just the energy business as it could deliver huge synergies. GE, like other US corporate giants, is keen to put its foreign cash reserves to work and the company holds around $57bn outside of the US that it could use for M&A. However, blockbuster deals may sit at odds with chief executive Jeffrey Immelt's previous strategy of looking for dealmaking opportunities in the $1bn to $4bn range.

Alstom’s shares fell back from a high of €32.30 on Thursday to €26.80 in afternoon trading, valuing the company at €8.36bn, a 11.36pc premium to yesterday’s close. GE did not return calls for comment.

There would likely be huge political sensitivities around Alstom's highly prized French TGV rail network falling into foreign hands. But any Alstom deal would have to overcome significant political opposition from the French government, particularly if it affected workers.

The French government has previously intervened in dealmaking to protect national interests when there was speculation in 2005 that Pepsi could bid for Danone.

French industrial group Bouygues, Alstom's biggest shareholder after it bought the French government’s 21pc stake in Alstom in 2006, said that it is supportive of the company’s strategy. In February it had to write down the value of its investment in Alstom by €1.4bn after a 37pc fall in the shares over the past year. The French government recently backed Bouygues ultimately failed attempt to acquire mobile operator SFR.

Last year Alstom said that it was considering selling assets as part of a wider plan to raise €3bn and reduce its bloated debt pile.

Alstom has seen its shares drop 20pc in the past 12 months as economic woes in Europe and a slowdown in emerging markets hurt demand. In contrast, GE posted strong first-quarter results in its core oil and gas division last week as it benefits from the shale fracking revolution in the US.