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