Siemens, Alstom Are Said to Finalize Rail Combination Deal

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  • French state said to back tie up of former rivals’ assets
  • French union representative says deal may lead to job cuts

Siemens AG and Alstom SA are nearing an agreement to combine their rail businesses, as the German and French engineering companies’ boards are poised to sign off on a deal that would create a European transportation giant, according to people familiar with the negotiations.

Siemens, based in Munich, is likely to own slightly more than half of the combined entity, said the people, who asked not to be identified ahead of a possible announcement as early as later Tuesday. The new business will be based and listed in France, the people said. The French government, which owns a stake of about 19.9 percent in Alstom, has backed the accord, one of the people said, while the enlarged entity is likely to be named Siemens-Alstom and will be headed by Alstom Chief Executive Officer Henri Poupart-Lafarge, two of the people said.

Siemens and Alstom, which confirmed last week that they are engaged in preliminary talks to combine their mobility subsidiaries, declined to comment. Siemens shares rose 0.3 percent to 117.05 euros at 3:57 p.m. in Frankfurt, while Alstom rose 0.5 percent to 33.58 euros in Paris.

Combining Siemens and Alstom assets would give them more heft to confront growing competition from China. In creating the world’s second-largest maker of rail cars and locomotives after China’s CRRC Corp., the European tie-up would also scuttle months of talks between Siemens and Bombardier Inc. and put up a new hurdle for the Canadian company’s turnaround plans.


"It is not that often that we see an M&A scenario that we like, and one that really is a ‘win-win’ – but there is scope for that to be the case here,” Ben Uglow, an analyst at Morgan Stanley, wrote in a note. The combination would be attractive especially for Alstom shareholders, while Siemens would benefit mainly from the new entity’s ability to better compete with CRRC, he said.

Siemens’s mobility unit includes signaling equipment as well as trams, regional trains and long-distance high-speed trains. Alstom has pared back its operations in recent years after selling its power-generation business to General Electric Co. At the time of negotiations with GE, Siemens had also been interested in a sweeping combination with Alstom, but was rejected by the French company and its owners, which also include conglomerate Bouygues SA. The planned combination harks back to the emergence of European planemaker Airbus in the 1970s and has been dubbed ‘Railbus.’

Prospects of a tie up have already drawn criticism from French unions. About two thirds of Alstom’s 32,800 employees are in Europe and the manufacturer came under pressure last year for a plan to halt production of high-speed TGV trains in eastern France.

“We are on course for a social disaster,” said Olivier Kohler, a representative for the CFDT union based in Alstom’s Belfort plant. “It’s real hypocrisy to talk about a ‘Railbus’ when we know that our jobs will be threatened in the next four years.”

— With assistance by Ania Nussbaum

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