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French major Areva today announced an exclusive arrangement with the Alstom and Schneider combine for sale of its T&D business. Raja Rajeshwari and Shruti Rajkumar tell us why Areva chose this offer despite a higher offer from Toshiba.
The Euro 4 bilion sale of T&D business is turning out to be a political hot potato. With the final decision out, voices of dissent have increased in the last 24 hours. While Toshiba has not commented, GE has announced its disappointment with the process.
Areva Works Council may challenge the sale on transparency issues and will question the deal in a workers meeting on Thursday.
Both Areva T&D management and workers have been opposing the sale to Alstom-Schneider consortium as that would mean breaking the third-largest supplier of transmission and distribution equipment into two. Schneider will take the medium-voltage distribution arm while Alstom intends to take the high-tension transmission business.
Earlier in an interview to CNBC-TV18, Alstom Global Chairman and CEO Patrick Kron had admitted as much.
“i would say split between the high voltage which is very close to our power generation business and the medium voltage which doesn't have the critical size within Areva T&D and by joining Schneider can become a major business and face the leaders in this field,” he said. “In addition to ownership, if there is a split, it increases the anxiety and our duty will be if we win this bid to explain what we are doing and convince everybody and I am confident that we will do it.”
This breakup will make Schneider equal market leader ABB. It may also make Alstom one of the world's biggest in the transmission equipment market. This deal needs to be cleared by the Transfers Commission, employee representatives and competition authorities. To win over employee support, Alstom-Schneider consortium has said it will not close down facilities till 2013 nor will it look at layoffs unless the environment deteriorates drastically. Back home, areva T&D India will also see a similar split but will it be merged with Alstom India is a key question?
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