Since announcing the proposed sale of a majority of Alstom’s
business to General Electric, the Board of Directors has taken the precaution
of stating that the sale would be subject to shareholder approval.
It's true that the example of Vivendi, which sold 70%
of its business without asking the opinion of its shareholders, led Medef (the
employers' union) to recommend that proposed sales with a significant impact on
a company be submitted to shareholder approval. In fact, it's very surprising
that the Vivendi Board of Directors didn't concern itself with the opinion of its
shareholders, as if they were incapable of understanding the benefits of the
transaction, and that it didn't suggest a split, as Total did with Arkema and
Accord with Edenred, just to mention a few.
Many of Alstom's shareholders are now wondering about
the rationale of the transaction with General Electric. For years, the idea of
developing several complementary business lines with different cycles and
levels of risk had led them to support the company strategy with the idea of
becoming a leading player in the different fields of activity. The tone of the
discourse then changed completely and they found out that, even though Alstom
has real know-how in large turbines, it couldn’t compete with world leaders or
even enter into partnerships with them. The only solution was to sell most of
the business. Alstom would only retain a very small interest in cyclical
sectors and face growing competition in transportation, notably in TGVs...
Some shareholders wonder about the real reasons for
the "alliance" and whether they aren’t related to the risks the
company might face because it has worked in countries under American embargo
(the BNP Paribas syndrome) or other risks that haven't been communicated to
shareholders at this time.
The interventionism of the French government, which
borrowed Bouygues shares with an option to purchase, to ensure the stability of
Alstom's remaining business lines, raises other questions because the
intervention only "protects" a very small portion of Alstom's
business...and Alstom's main shareholder hasn’t hidden its desire to sell its
holding.
The company doesn't appear to have an alternative
plan, although if 34% of shareholders oppose the transaction, it won't go
through...and the idea of allowing repayment of the debt when interest rates
are at their lowest ever doesn't provide a vote in favour of a transaction
which has no immediately apparent economic rationale except for... General
Electric!
Even if the Board of Directors is convinced that the
General Electric scenario is the right one, it still owes shareholders an
alternative scenario that will enable the company to grow through partnerships,
although likely different ones. It must propose at least two alternatives to
shareholders to give them the option to express their opinion with complete
transparency and ensure that their choice is made in the interest of all
stakeholders, particularly, employees.
Paradoxically, there seems to be a “code of silence”
in place given that all commentators have validated the scheme proposed with no
questions asked. It's as if there was no other possible solution, as was the
case a few years ago when a sale was very nearly completed for "1
franc" (Thomson)...
There isn't much time left for shareholders to make up
their own minds. It would very worrisome if there was only one way forward and
little or no exchange between shareholders regarding the transaction which is,
nevertheless, very significant given the current French climate.
Olivier de Guerre
Chairman of PhiTrust Active Investors
