French politicians fear Siemens strength after rail deal

Reuters

Reuters

Siemens had sought to head off the GE-Alstom deal in 2014 with a proposal that would have handed its rail operations to the French company in exchange for the power business.

Finance and Economy Minister Bruno Le Maire told reporters Wednesday that the deal is especially important given growing competition from Chinese train makers to meet worldwide demand for the kind of high-speed trains once exemplified by Alstom's TGVs.

Though Alstom is of a similar size to the rail division of Munich-based Siemens, with annual sales of more than 7 billion euros ($8.20 billion), the German business is part of a group that ranks as Europe's largest manufacturer with nearly 80 billion euros ($93.76 billion) in revenue and a product range spanning power grids and building controls to medical scanners, washing machines and wind turbines.

Alstom's Poupart-Lafarge said: "Today is a key moment in Alstom's history, confirming its position as the platform for the rail sector consolidation".

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. The business headquarters for Mobility Solutions will be in Berlin, Germany, and the business headquarters for Rolling Stock will also be in France.

The combined company to be called Siemens Alstom will have US$18 billion in revenues - about double that of Bombardier Transportation - and US$1.4 billion in adjusted EBIT.

Siemens and Alstom say they aim to save 470 million euros a year within four years by joining their train manufacturing activities. To ensure management continuity, Henri Poupart-Lafarge will continue to lead the company as CEO and will be a board member.

The tie-up, set to help the companies counter the rise of China's state-owned CRRC 601776.SS , represents an industrial win for French President Emmanuel Macron, who is proposing sweeping reforms for Europe, including deeper trade cooperation. Kaeser announced the goal to lift the French company's profit margin before taxes and interest from 5.8 percent to Siemen's level of 10 percent. The deal must be approved by Alstom shareholders and regulators, and is expected to close next year. It is estimated that synergies will be of 554,2 million USA $for four years after the closing of the transaction.

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