France Cheers Alstom Deal; Taxpayers Pick Up the Bill
Details of Bailout Show Paris to Inject $2.66 Billion, State Will Hold 31.5% Stake By CHARLES FLEMING and BRANDON MITCHENER Staff Reporters of THE WALL STREET JOURNAL May 27, 2004
PARIS -- France will acquire a 31.5% stake in loss-plagued engineering giant Alstom SA as part of a �4 billion ($4.84 billion) bailout package, offering a pricey example of the French government's willingness to intervene to prop up its own companies.
Alstom outlined the terms of the bailout a day after the European Commission's antitrust authorities agreed that France could rescue the country's flagship train, turbine and ship manufacturer. Chief Executive Patrick Kron said that as part of the bailout, the government would become Alstom's dominant shareholder.
French officials cheered the deal for protecting French jobs and keeping a national industrial champion in French hands. Prime Minister Jean-Pierre Raffarin, in a radio interview, praised the Alstom rescue as a product of France's industrial policy. "We want big champions to stabilize jobs and research in France," he said.
France will shoulder �2.2 billion of the bailout package. The remaining amount will come from banks, including BNP Paribas SA, Credit Agricole SA and J.P. Morgan Chase & Co., and from other investors.
Mr. Kron shrugged off suggestions that Alstom had been effectively nationalized, saying the firm had been handed a financial lifeline that would enable it to remain intact. "We resisted the centrifugal forces [to split up the company] when we were at our weakest, and have shown our determination to put Alstom back on its feet in one piece," he said.
Alstom wants to raise new equity worth almost twice its current market capitalization. Shareholders must either accept massive dilution or back a risky recovery story. Which is it to be?