Siemens-Alstom merger will add competitiveness to the European rail industry

Despite getting the backing of the German and the French government, the deal hangs in the balance on concerns from anti-trust regulators that it could stifle competition in the rail sector.

As per sources familiar with the matter at hand, Siemens is unlikely to make any further concessions to the European Commission in order to save its merger with France’s Alstom.

“If the Commission refuses, then we cannot do the deal,” said the source while adding, “Then this topic is over.”

So far Siemens has offered to license parts of its high speed train business as well as sell parts of its signaling operations in order to address the concerns raised by the EU authorities who are worried that the potential deal could stifle competition in the rail sector.

The point of contention between the European Commission and Siemens is, to what extent and how much of Siemen’s high speed train technology should be shared with third parties.

As per a source, the the fate of the merger rests with the European Commission which is set to make a ruling on the deal by February 18.

Siemen’s merger with Alstom will create the world’s second largest rail company with combined revenues of around 15 billion euros.

According to sources, if the merger does not go through, Siemens is confident on the growth prospectus of Siemens Mobility, its in-house rail technology division. Growth prospectus includes potential acquisitions, said a source,

“We will consider all options,” said a source from Siemens, including a potential IPO for Siemens mobility business with Siemens keeping a stake. “We absolutely believe that we can develop our business as it is today in a very attractive way”.

On Thursday, Alstom stated it was optimistic that the deal would be completed in the first half of 2019.

“The proposed combination of Alstom with Siemens Mobility, including its rail traction drive business, has progressed in the last quarter,” said Alstom in statement while adding that both companies had presented proposals to win over regulators, while adding, “The proposed remedies include mainly signaling activities as well as rolling stock products and represent around four percent of the sales of the combined entity. The parties consider that the proposed remedy package is appropriate and adequate”.

On its part, the German government has backed the deal, saying the deal would help secure the competitiveness of the European rail industry.

Germany’s antitrust authority along with four other regulators have however expressed concerns regarding the deal to the European Commission.

France has also backed the deal saying a decision to block it would be a mistake.

Incidentally, in December Margrethe Vestager, the European antitrust commissioner, backed the deal and voiced doubts over its impact on the high-speed trains industry in Europe.

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