Siemens-Alstom rail merger deal includes four-year plant guarantees

Credit Alstom

Credit Alstom

French unions remain anxious about potential job losses when Alstom SA becomes Siemens Alstom after the deal announced Tuesday.

The German Siemens and its rival, the French Alstom has confirmed on Tuesday the grouping of their activities related to the manufacturing of rolling stock, this leaves Bombardier Transportation plan.

Alstom Chief Executive Henri Poupart-Lafarge on Wednesday expressed confidence that the deal would receive antitrust approval. Thanks to its global reach across all continents, its scale, its technological know-how and its unique positioning on digital transportation, the combination of Alstom and Siemens Mobility will bring to its customers and ultimately to all citizens smarter and more efficient systems to meet mobility challenges of cities and countries.

"We need to strengthen our ability to compete", Siemens CEO Joe Kaeser said in a video about the tie up, which the companies call a merger of equals.

The combined business would have sales of about €15 billion ($18 billion). "There is a lot to do, then we go after the synergies", he said, which are estimated to amount to around 470 million euros ($551.8 million) annually and expected four years after the deal has closed.

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Mergers in China and Europe leave Bombardier "still looking for a dance partner", said David Tyerman of Cormark Securities.

Bouygues is set to own 28.2 percent of Alstom as the French state has said it will not exercise an option to buy the 20 percent stake in Alstom which the government borrowed from Bouygues in 2014, when Alstom was selling its power engineering business to General Electric.

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

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. The French state will no longer have a role in the new company.

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. It is estimated that synergies will be of 554,2 million U.S. $for four years after the closing of the transaction.

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