Bombardier stock up after Europe rejects mega rail merger

Bombardier Inc. could benefit after European competition authorities rejected a merger between Siemens AG of Germany and Alstom SA of France, leaving analysts to speculate whether the French rail giant will join forces with the Canadian company instead.

The stock prices of Bombardier and Alstom jumped Wednesday after the European Commission quashed their merger in the name of preserving competition in rail signalling and very high-speed train manufacturing. Bombardier’s stock closed up 6.2 per cent at $2.05 in Toronto.

The merger would have created a company with more than 62,000 employees and about US$17.4 billion in revenue, more than double Bombardier’s US$8.5 billion in revenue in 2017. Siemens and Alstom had aspired to create a “European champion” to take on China’s CRRC Corp. Ltd., the world market leader that tripled Bombardier’s revenue in 2017.

But regulators blocked the merger after a 16-month review, stating that Siemens and Alstom weren’t willing to address concerns about competition.

The deal’s downfall prompted analysts at German investment bank Berenberg to note that Alstom might seek an alternative deal with Bombardier, which wants to expand its transportation business to $10 billion in revenue by 2020. “We believe there is a higher chance for anti-trust approval than the Siemens/alstom tie-up due to lower European market share in high speed rail and signalling,” Berenberg noted to clients.

Bombardier executives would not discuss the failed merger or rumours of a separate deal with Alstom, but in a statement said the company remains focused on growing its transportation business and “will keep looking at opportunities to create the best value for our shareholders.”

Regardless of any partnerships, Bombardier no longer has to worry about being dwarfed by two of its rivals in the European market, arguably one of the most advanced in the world.

Bombardier is “pleased” the merger was blocked, senior vice-president Daniel Desjardins said in a statement. “It would have severely undermined the health and competitiveness of the whole European rail market, leaving European consumers ... to pay the price.”