The French government has had its ability to buy Alstom shares in the open market capped by regulators, raising the potential cost of becoming an anchor investor while General Electric proceeds with a $17 billion deal for the power-turbine maker.

An agreement with shareholder Bouygues for the state to buy as much as two-thirds of its Alstom stake, alongside an option to acquire freely traded shares, may create an unfair situation, the Autorité des Marchés Financiers said. It's concerned the government, working with Bouygues, would end up with a combined stake of more than 30 per cent without triggering a mandatory offer.

As part of a complex deal with GE, France moved to take a stake in Alstom in the most cost-effective way via the market and the Bouygues stake.

Under the regulator’s ruling, the state may have to fulfil its agreement with Bouygues at a premium price rather than take the cheaper market route.

Bouygues owns 29.3 per cent of Alstom. When holdings are counted together, “certain thresholds can be broken”, David Azema, head of state-holding agency Agence des Participations de L’État, said in an interview. “We have pledged to do nothing that would see us break the threshold.”

France is looking to safeguard national interests as GE takes over the gas-turbine business and forms other alliances spanning nuclear and power transmission. The state’s involvement was pivotal in GE winning support for its alliance amid a counter offer from a group including Siemens.

Alstom shares traded 1.9 per cent higher at €26.57 as of 11.01am in Paris. Bouygues, which added 0.2 per cent to €30.38, has pledged to sell its stake to the state for a minimum €35 a share.

In its ruling, the regulator has left the state little leeway for buying shares in the open market, unless the French construction and telecommunications group lowers its stake. – (Bloomberg)