France has agreed to sell a stake of at least 3.1% in gas utility GDF Suez to help finance the purchase of a share in engineering group Alstom.
On Sunday, France agreed an option to buy 20% of Alstom from its current top shareholder Bouygues.
It cleared the way for a tie-up between Alstom and General Electric.
The new deal, which the government supports, will see GE buy Alstom’s operations that manufacture natural gas turbines for power plants.
The state agreed to sell 75 million GDF Suez shares and has an option to sell as many as 86 million in a sale to fund managers and other big market players.
In turn, Alstom will buy GE’s railway signalling systems division.
In addition, GE and Alstom will create three joint ventures, equally owned, for power grid, renewable energy and nuclear power businesses.
Selling 86 million shares at Tuesday’s closing price would raise about 1.79bn euros (£1.4bn).
“This sale is part of an active management of state holdings… the proceeds could be used to finance the state’s entry into the capital of Alstom,” the finance and economy ministries said in a statement.
The French government is the lead shareholder in GDF Suez and had a 36.7% stake in the firm at the end of 2013. Publicly-owned bank CDC owns another 1.9%.
France has sold stakes in a number of firms including Airbus, Safran and Aeroports de Paris, raising more than 2bn euros, Economy Minister Arnaud Montebourg has said.