Bombardier Siemens, near deal to combine rail units

FRANKFURT Bombardier and Germany’s Siemens are in the final stages of talks to combine their rail operations, several sources familiar with the matter said on Friday, in a deal that would give the two added heft to compete against Chinese rail giant CRRC.

The deal, which would create two separate joint ventures for their signalling and rollingstock divisions, could be announced as early as August, the sources said.

Siemens’ supervisory board will discuss the matter at its meeting on Aug. 2, while Montreal-based Bombardier’s board is expected to consider it before the company’s secondquarter earnings call next week, the sources said, adding that an announcement could come in early August.

All of the sources spoke on condition of anonymity because the talks are confidential.

Rail consolidation has been a trend over the last few years, as global companies seek to contain costs and Western companies struggle with the rising ambitions of China’s state-backed CRRC at home and abroad.

Media reports in April that Siemens and Bombardier explored a combination with total sales of US$16 billion had sparked antitrust concerns in Europe.

Bombardier would take just over a 50-per-cent stake in the joint rolling stock operations, one source said. Siemens would take roughly an 80-per-cent stake in a joint venture in the higher-margin signalling technology, two of the sources said.

While a deal could be a “winwin” for both companies, any agreement that largely cedes control over Bombardier’s lucrative signalling business to Siemens, the market leader, could worry Bombardier’s investors, an analyst said.

Nevertheless, a tie-up could help Bombardier, the rail industry’s fifth-largest signalling player by market share, grow that business, the analyst said.

Bombardier and Siemens declined to comment.

No money would be exchanged as part of the deal, two of the sources said.

It was not yet clear what role Caisse de depot et placement du Quebec, which owns a 30-per-cent stake in Bombardier Transportation, would play in the deal.