Siemens and the French government intervened in General Electric's plan to buy the power arm of Alstom on Sunday with an alternative European "champions" tie-up proposal and a pledge to act inFrance's national interest.
Though French trains-to-turbines maker Alstom is privately owned, firebrand Economy Minister Arnaud Montebourg issued a stark reminder of the influence the government holds over a company that relies heavily on orders from state rail operator SNCF and partly state-owned utility EDF.
"GE and Alstom have their calendar, which is that of shareholders, but the French government has its own, which is that of economic sovereignty," Montebourg said in a statement, providing the first official confirmation of GE's offer.
GE boss Jeff Immelt was in Paris on Sunday to thrash out a $13 billion deal for struggling Alstom's power turbines and grid equipment. Montebourg had planned to meet him but the encounter was postponed until later in the week after the minister advertised an alternative proposal by German rival Siemens.
The Siemens proposal would create "two European and global champions in the energy and transport domains - one around Siemens, the other around Alstom", Montebourg said.
Montebourg said the government would not accept any hastily made decision, that it would seek to preserve France's jobs and industrial base and would in particular be "extremely vigilant" in ensuring the nation's nuclear industry remains independent.
The warning compels Alstom and GE to tread carefully. However, sources familiar with the talks said these were very advanced.
"Alstom has received a firm offer from GE and an expression of interest from Siemens. It's not at all the same kind of commitment," one of the sources said.
TRAINS PLUS CASH
Earlier in the day, Siemens entered the fray with an announcement that it had written a letter to "signal its willingness to discuss future strategic opportunities" with the French group. Siemens gave no further details.
A report on newspaper Le Figaro's website on Sunday said Siemens was offering Alstom half of its train-making business plus cash in exchange for its French rival's power turbines division.
Le Figaro said Siemens was proposing that Alstom take on the Siemens high-speed trains and locomotives arm, but not its metropolitan trains division. A report in Germany's Handelsblatt outlined a similar scenario and put the value of the proposed deal at 10-11 billion euros ($14-15 billion).
Alstom CEO Patrick Kron has said in the past he is against creating a Franco-German train manufacturer.
As well as the power turbines arm GE wants to buy, Alstom makes TGV high-speed trains and is one of France's top private-sector employers.
Though Alstom is struggling with heavy debt and weak demand, political sensitivities run deep in France.
Marine Le Pen, leader of the far-right National Front (FN) party that won widespread support in last month's local elections, said the government had "abandoned Alstom to be dismantled for American or German profit".
A Siemens tie-up may be no more palatable to some than a deal with GE. A decade ago, Alstom was rescued by a state-backed restructuring when Kron and France's then-president, Nicolas Sarkozy, both balked at the prospect of a Siemens acquisition.
A deal to sell Alstom's power assets, which account for about 70 percent of total group revenue, would effectively break up the engineering group and leave Alstomas a pure transport business, building its TGV trains, other rolling stock and rail signaling equipment.
Alstom and Siemens are direct rivals in steam turbines, offshore wind power, hydro power and grid. For its part, GE is absent from offshore wind and hydro power and could use the boost in steam turbines and grid.
Sources have said a deal with GE is backed by Alstom's main shareholder, French conglomerate Bouygues, which holds a 29 percent stake.
Before the news of an approach from GE, Alstom shares had slumped 20 percent in 12 months on concerns over its cash flow, prompting Bouygues to take a $1.9 billion writedown on its stake in February. Trading of Alstom shares was suspended on Friday at the request of market regulator AMF.
(Additional reporting by Andrew Callus, Matthieu Protard and Natalie Huet in Paris, Anjuli Davies in London and Soyoung Kim in New York; Editing by David Goodman and Gareth Jones)
($1 = 0.7227 Euros)