General Electric Co. made a 12.4 billion euro ($17 billion) offer for Alstom SA’s energy business to open up official negotiations and circumvent a potential counterbid from Siemens AG.

Alstom’s board received a binding offer from Fairfield, Connecticut-based GE and has appointed a committee of independent directors to review the transaction by June 2, the two companies said Wednesday. If the review concludes positively, negotiations will then be on an exclusive basis, it said. Alstom gained as much as 15 percent in Paris trading Wednesday.

The announcement leaves the door open for a rival offer from Germany’s Siemens, which Tuesday said it will make an offer for Alstom pending access to financial information.

Alstom, a maker of power equipment and the high-speed TGV trains, is coveted by the French government, which wants to extract the best terms from any bidder for jobs and the country’s energy independence. In separate meetings with French President Francois Hollande, Siemens chief executive officer Joe Kaeser and GE CEO Jeffrey Immelt have sought to make their case. 
 

“None of these big players buying Alstom is going to have a smooth ride,” said Simon Toennessen, an analyst at Credit Suisse Group AG. “Siemens is seeing the competitive threat from GE as big enough to consider this step.”

Siemens asked for access to Alstom’s data and permission to interview the management for four weeks in a letter to the French company, the German rival said in a statement Tuesday. Munich-based Siemens, which was also interested in acquiring parts of Alstom more than a decade ago, is willing to match or exceed the financial terms of GE’s offer, people familiar with the proposal have said.

Siemens’s proposal would probably entail swapping some of its rail assets for Alstom’s energy division and creating two “European champions,” French Industry Minister Arnaud Montebourg has said. Siemens would become one of the world’s largest manufacturers of equipment for power plants and electric transmissions while the companies’ train assets would form a France-based rail industry leader, bringing together the German company’s ICE high-speed trains with Alstom’s iconic TGV.

Rolls-Royce Holdings Group Plc said Tuesday it’s in talks to sell power-generation assets to Siemens, adding to a flurry of possible cross-border deals as some of Europe’s largest engineering companies reshape their portfolios.

Under the proposed GE transaction, Alstom would keep its transport business. The French company said Wednesday it would use the proceeds from GE to “strengthen its transport business and give it the means of an ambitious development, pay down its debt and return cash to its shareholders.”

GE said Wednesday its all-cash offer values the business at 7.9 times pro forma earnings before interest, taxes, depreciation and amortization, adding that the purchase would be accretive to earnings in the first year.

“Alstom’s businesses are very complementary in technology, operations, and geography to our power and grid businesses, “Immelt said Wednesday. “We expect these actions will generate more than $1.2 billion in annual cost synergies by year five.” (Bloomberg)