French politicians fear Siemens strength after rail deal

Alstom has confirmed that it has been holding discussions regarding a possible ‘combination’ with Siemens’ Mobility Division

France is open to the possibility of expanding the rail combination between Siemens AG and Alstom SA to include Bombardier Inc., the Montreal trainmaker left on the sidelines of talks to create an industry champion to take on China. Global headquarters as well as the management team for rolling stock will be located in Paris area and the combined entity will remain listed in France.

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".

2015 - Alstom bought the signaling unit of US conglomerate General Electric (GE.N) for 700 million euros.

The French government is believed to have pushed Alstom and Siemens together to create an "Airbus for rail" - a reference to the successful European aircraft maker - which would have combined annual sales of around 15 billion euros. The second person said Siemens' supervisory board would decide the matter on Tuesday, also describing Alstom as the frontrunner.

French Finance and Economy Minister Bruno Le Maire told reporters Wednesday that the deal is crucial given growing competition from Chinese train makers to meet worldwide demand for the kind of high-speed trains once exemplified by Alstom's TGVs. Alstom has pared back its operations in recent years after selling its power-generation business to General Electric Co.

Until recently, Alstom and Siemens had been strong rivals, competing against each other on a variety of contracts including making new trains for Eurostar, who switched suppliers from one company to the other. However, Siemens' rail unit has been more profitable than Alstom's in recent years. Alstom shareholders will receive two special dividends totaling EUR1.8 billion ($2.13 billion): EUR4 a share for surrendering control of the company and EUR4 a share as an "extraordinary dividend", the companies said.

To ease French concerns, the current chief executive of Alstom, Mr. Poupart-Lafarge, will lead the new business. "The global marketplace has changed significantly over the last few years A dominant player in Asia has changed global market dynamics and digitalization will impact the future of mobility".

Tuesday's deal is meant to help Europe's rail industry confront an increasingly serious threat: CRRC Corp., the world's biggest rail supplier, and other companies in China's government-run train industry.

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