Alstom and Siemens set to merge rail assets, reports say

Reuters

Reuters

German industrial company Siemens AG on Tuesday agreed to merge its rail operations with French train-maker Alstom SA, aiming to create a European giant with the scale to fight growing competitive threats from state-backed Chinese rivals. The new company will be listed on the French stock exchange, with 50% of the shares of the new entity to be owned by Siemens.

A spokesman for Siemens confirmed the pledge, saying it covered major sites in Germany and France.

The combined business would have sales of about €15 billion ($18 billion).

Although the two companies are carrying out a merger of equals, Franco-German competition has not been completely quelled.

"The global market-place has changed significantly over the last few years". Annual cost savings of US$554.2 million are expected four years after closing.

There will be a contribution in kind of the Siemens Mobility business driving business to Alstom for the newly issues shares of Alstom, and will be subject to Alstom's shareholders' approval, including for the purposes of cancelling the double voting rights. Siemens is also the leader in signaling technology, while Bombardier - whose transportation headquarters are in Berlin - is stronger in commuter and light-rail trains.

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However, Henri Poupart-Lafarge will continue to lead the company as CEO and will be a board member. Macron, who advocated that European Union should be transformed into a stronger, more influential and functioning structure, is said to have made this call in Germany, waiting for last Sunday's elections.

Siemens and Bombardier have also worked together, including to develop rail control systems for NY city.

The deal would dilute French control over Alstom, which shrank dramatically in 2015 when the company sold its electric turbine division to USA industrial conglomerate General Electric Co. It is estimated that synergies will be of 554,2 million USA $for four years after the closing of the transaction.

Tuesday's deal is meant to help Europe's rail industry confront an increasingly serious threat: CRRC Corp., the world's biggest rail supplier, and other companies in China's government-run train industry.

The new European company with 62,300 employees in more than 60 countries will have an order backlog of US$72 billion and an adjusted margin of eight per cent.

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