France chose General Electric to form an alliance with Alstom yesterday, rejecting an offer from Siemens and Mitsubishi Heavy Industries – but said the deal still needed some work and added it would buy a 20 per cent stake in the hotly contested company.

Economy minister Arnaud Montebourg said he had used a newly created state decree to reject both of the existing offers as not being in France's strategic interest, and had formulated fresh demands to GE chief executive Jeff Immelt.

The decision ended weeks of suspense surrounding one of Europe’s fiercest industrial battles in years, but left open major questions about the final shape of an alliance that GE hopes will give it access to new power markets.

He said the offer from Siemens and Mitsubishi Heavy Industries was “very serious” and that he had personally backed it, but that the government “had made up its mind”.

Alstom, GE and Siemens all declined to comment.

Lucrative

Mr Montebourg confirmed that Alstom’s lucrative gas turbines arm would be purchased by GE and said there would be discussions on the shape of joint ventures in other energy areas ranging from renewables to nuclear.

He said the French state would come in as the top shareholder in Alstom by purchasing a 20 per cent stake in it from Bouygues, currently the holder of 29 per cent.

GE will sell its rail-signalling business to Alstom as part of plans to strengthen the transport activities of the French group, maker of the famed TGV high-speed trains.

Alstom suffered more than bigger rivals from the 2008 economic crisis, which depressed electricity demand and caused a slump in the market for new power plant equipment, hitting its cash flow and ability to service debt.

But its assets are valuable to rivals slugging it out in a tough market. – (Reuters)