Abu Dhabi, UAESunday 18 August 2019

Siemens and Alstom offer new concessions to save planned rail merger

The companies offered to sell signalling assets and longer licensing agreements

A high speed train  made by French trainmaker Alstom stops next to a German model made by Siemens. The two companies, which are offering fresh concessions to save their rail merger deal, say they have already identified potential acquirers. Photo: Reuters
A high speed train  made by French trainmaker Alstom stops next to a German model made by Siemens. The two companies, which are offering fresh concessions to save their rail merger deal, say they have already identified potential acquirers. Photo: Reuters

In an unusual 11th-hour move, German technology giant Siemens and France's Alstom have offered a fresh package of concessions designed to allay European Union antitrust concerns that their planned rail merger would hurt competition in the region.

The companies have offered to sell signalling assets as well as longer licensing agreements, and have already identified potential acquirers, Bloomberg news cited people familiar with the matter. Without the remedies, the deal was poised to be blocked by Europe’s antitrust regulator, it reported last week. The new ones may not be enough to save the troubled tie-up.

Spokesmen for Siemens, Alstom and the European Commission declined to comment.

Alstom shares jumped 6.1 per cent in Paris to €36.37 (Dh152.31), still significantly lower than the €42.70 considered fair value by Morgan Stanley “if the deal goes ahead.” Siemens rose 1.3 per cent in Frankfurt.

The EU’s top competition official, Margrethe Vestager, has come under intense political pressure from France and Germany to allow the deal to go through, with the governments arguing in favor of the emergence of a European champion to take on competition from China. Executives and politicians mounted a fierce campaign this week to sway Ms Vestager, who said she was still open to a new proposal, but that it would have to be "very blunt" - or sizeable.

The companies first offered up a concession package in December, and attempted to add sweeteners in subsequent conversations with the commission, sources said, but were unable to sway the regulator then.

At issue for the regulator are high-speed trains, which both companies make, as well as the duration for licensing agreements. The commission had asked Siemens to give up licensing for a decade, though the companies were only willing to give five years.

Behind the scenes, Siemens was said to have also been looking at options for its business should the merger fail. Siemens chief executive Joe Kaeser said this week in an interview he was still assuming it would be approved, but a listing of the unit’s shares would be among the possibilities should it fail.

The commission is set to make a decision February 6 or February 12 on the tie-up.

A collapse of the deal would be a setback for two historic European industrial manufacturers and former fierce rivals. Their plan, unveiled in September 2017, was to build a transportation giant out of Siemens’s mobility unit and Alstom, with the idea that the resulting entity, with combined sales of about €15 billion , would be able to counter global competition, especially from China.

Updated: January 26, 2019 04:22 PM

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