Siemens chief Joe Kaeser met French president Francois Hollande on Monday night to discuss a potential Alstom deal that would make the German company the global number one in both power generation and transmission if it succeeds, however it must not just persuade Paris, but crucially Brussels too.

The Financial Times reports that persuading the French government and Alstom to snub GE’s advances in favour of synergetic Franco-German transport and power ‘champions’ might work. Kaeser is proposing the energy business to come under Siemens’ leadership while the trains unit would remain under Alstom stewardship.

The FT states, “Perhaps the biggest hurdle to pulling off an asset swap in power generation and trains would therefore be competition concerns. A person close to the talks said that regardless of which bid is accepted both GE and Siemens’s proposals would inevitably draw attention from antitrust authorities, particularly in Europe.”

If Brussels reacts favourably the deal  would make Siemens the world’s top power company.

  Alstom’s installed base is estimated at about 25 per cent of the global total. According to Citi Research, Siemens would therefore hold roughly 50 per cent share of global installed power generation capacity, ahead of GE with 25-28 per cent.

  In the past the European Commission has demonstrated aversion to calls to create European champions and has tended to champion instead the rights of the consumer.

  “The price of creating a European champion cannot be to let a de facto monopoly dictate its commercial conditions on thousands of European firms operating with European derivatives,” Joaquín Almunia, European commissioner for competition policy, said in 2012, explaining his decision to block a merger between Deutsche Börse and NYSE Euronext. “A monopoly would have been more beneficial for the parties’ shareholders, but it would have harmed customers.”

The French economy minister Arnaud Montebourg has clashed with the EU Competition Authority earlier this year, angrily denouncing Almunia over the bloc’s state-aid policies, saying his strict application of controls on state subsidies was preventing Europe from meeting mounting global competition.  

“While our global industrial competitors get billions in subsidies, our bureaucracy is led by political leaders – Mr Almunia is a political leader – who have not understood that the world has changed,” Mr Montebourg said. “It is like Rome surrounded by the barbarians. We all await the fall of Rome. It’s not funny.”

Brussels’ view is vital as there is no provision in the treaties allowing member states to overrule the commission. As a rule of thumb any market share above 40 per cent is seen as problematic.

Much would depend on how the European Commission chose to define the relevant markets – whether it took a narrow European view or looked at the global rail and power equipment markets.

GE, meanwhile has received a boost with the news from insiders that the French government is not opposed to their bid.

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