Siemens, Alstom merge rail operations to create giant European train business

28 September, 2017, 00:40 | Author: Dustin Murphy
  • Reuters

The Alstom merger with Siemens' railway division has been mooted for years and completes the transformation of the French group, which sold off its energy business to American rival General Electric in 2015 for 9.5 billion euros ($11.3 billion).

Their worries centre on France losing control of its TGV high-speed train - a symbol of national pride that has highlighted French engineering skill - and possible job losses.

Siemens will receive newly issued shares in the combined company representing 50 percent of Alstom's share capital on a fully diluted basis, and as a combined setup, Siemens and Alstom expect to generate annual synergies of €470 million by year four.

We put the European idea to work and together with our friends at Alstom, we are creating a new European champion in the rail industry for the long term.

Siemens and Alstom are strong in high-speed intercity trains with their ICE and TGV models. "This will give our customers around the world a more innovative and more competitive portfolio", said Joe Kaeser, President and CEO of Siemens AG. They have combined sales of 15.3 billion euros ($18 billion) and earnings before interest and tax of 1.2 billion euros.

Shares in French conglomerate Bouygues, which has a stake in Alstom, rose 2 per cent to be the top performer on France's benchmark CAC-40 index.


It is noted that merger between Alstom and Siemens has come to an end at end of August between Macron and German Chancellor Angela Merkel, and that two leaders have agreed to unite.

The merger of Alstom and Siemens Mobility's rail businesses has been confirmed in a joint statement released by the companies.

Backers believe the new European rail giant would be more able to challenge China's CRRC, which is eyeing Skoda Transportation in the Czech Republic as a potential foothold in Europe.

The merged company will be called Siemens Alstom, with headquarters based in Germany and rolling stock based in France. Years of bitter rivalry between the European companies created animosity in the past so a deal between them was unexpected until last week, when Bloomberg reported talks.

Yet Siemens, too, had seen the writing on the wall as overcapacity in Europe ate into rail margins, accentuated by the entry of Shinkansen partner Hitachi, which established its global headquarters and a major factory in the United Kingdom after winning a 5.7 billion-pound ($7.68 billion) express-train contract there.

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