France Issues Law To Block Foreign Takeovers Of Strategic Companies

In a surprise move, France's government issued a decree that will allow it to block foreign takeovers of French companies in strategic industries such as energy, transport and telecom, Reuters reported.

A decree published in France's Official Journal on Thursday will bring the state the ability to prevent takeovers like General Electric's (GE.N) planned $16.9 billion bid for the energy assets of engineering group Alstom (ALSO.PA), according to Reuters. Cash-strapped Alstom, which makes France's highly regarded high-speed trains, was bailed out by the France's government a decade ago and is considered by many to embody the highest standards in engineering in the country.

The decree said that any takeover in the water, energy, transport, telecom and health sectors will now required the approval of the Economy minister.

The government didn't say it was considering a measure of this nature, and the measure has not been discussed publicly.

Arnaud Montebourg, France's Economy and Industry minister, has criticized the Alstom-GE proposal and has advocated for a European tie-up with Germany's Siemens (SIEGn.DE). To review its options, Alstom has given itself until the end May, Reuters reported.

"With this decree, we're armed to continue discussions and negotiations with the two companies that have expressed an interest," a source close to Montebourg noted.

According to the Wall Street Journal, the new legal tool could give Montebourg a boost in his crusade for the independence of Alstom.

GE has said it was in talks with French authorities to improve some aspects of its bid, which Alstom's board has endorsed unanimously, the Journal reported.

The decree, reported earlier by French daily Le Monde, risks impairing recent efforts by French Socialist President François Hollande to win over investors -- both at home and abroad -- with pro-business overtures, according to the Journal.

However, days before European parliamentary elections in which nationalist parties are likely to make a strong showing, the law could help Hollande show he's standing by Alstom, the newspaper added.