By Mark John and Maria Sheahan
PARIS/FRANKFURT, June 20 (Reuters) - Siemens and Mitsubishi Heavy Industries (MHI) raised their offer for Alstom's energy arm on Friday, challenging a revamped bid by General Electric as the deadline for a decision nears.
President Francois Hollande's government, which has said it will veto any deal that does not protect French jobs and control over strategic activities, has yet to pronounce on either deal ahead of a decisive Alstom board meeting set for Monday at the latest.
The French leader was due on Friday to consult key ministers before holding a further round of discussions with officials from GE and Siemens-MHI that could seal the fate of the ailing 86-year-old engineering group at the centre of one of Europe's fiercest industrial battles for years.
Responding to a new GE bid on Thursday aimed at appeasing French political concerns, Siemens-MHI simplified the structure of its offer and raised its cash component by 1.2 billion euros ($1.64 billion) to 8.2 billion.
This values Alstom's power businesses at 14.6 billion euros, Siemens said, 400 million more than previously and still well above GE's 12.4 billion.
"Such (a) proposal is superior industrially, financially and socially," Siemens said, reaffirming pledges to create new jobs in France, a commitment the U.S. conglomerate has also made.
The new Siemens-MHI proposal still foresees Siemens buying Alstom's gas turbine arm. But MHI is now offering to buy a 40 percent stake in its combined steam, grid and hydro businesses and bundle them in a single holding company rather than three joint ventures, a plan Alstom sources had said was too unwieldy.
The French group reaffirmed that its board would meet no later than Monday to review the offers and that it planned to make no further statement in the meantime.
GE on Thursday radically overhauled its offer following talks with French government and trade union officials, transforming what had been largely a straight purchase into an offer of joint ventures similar to that of Siemens-MHI.
The cash component fell to an as yet unspecified level as it would sell its rail signalling unit to Alstom and set up 50/50 joint ventures in grid, nuclear and renewable assets. However, GE would still end up with the lucrative gas turbines that account for roughly a third of Alstom's power business.
The nuclear alliance proposed by GE would see the government hold a preferred share, giving it a veto and other rights over issues related to security and technology of nuclear plants - a vital point in France, which relies heavily on nuclear energy.
"OFFERS KEEP IMPROVING"
"The offers of the two sides keep on improving," French Prime Minister Manuel Valls told France Inter radio. "We have more meetings today to move towards a decision in conjunction obviously with Alstom, because it ultimately must decide."
Valls said the French government's criteria were "above all the preservation of strategic interests, preserving a certain number of decision-making centres in France and Europe, and obviously jobs".
Hollande's government has congratulated itself on blocking GE's initial advances on Alstom some two months ago and forcing it to improve its offer, not only by encouraging Siemens to enter the fray but also by signing off a decree giving itself the power to block industrial tie-ups in strategic areas.
Yet sources involved in the back-room discussions over the past seven weeks said it was not clear whether there was a single government line.
Several union representatives of Alstom and political sources told Reuters the saga had drawn a divide between Montebourg, who they said lent towards the Siemens-MHI plan, and Hollande, in favour of GE.
"There are really two lines: Hollande and Valls who want to find the best solution and Montebourg who absolutely wants it to be Siemens," said one source familiar with the situation.
While no one has publicly drawn a link between the two cases, Hollande is also lobbying U.S. authorities to reduce the penalties which France's biggest lender, BNP Paribas, faces for breaching U.S. sanctions in 2002-2009, notably its dollar-financing of oil trade out of Sudan.
($1 = 0.7336 Euros) (editing by Janet McBride)