Bombardier in talks to merge train business
FRANKFURT— Siemens AG and Bombardier Inc. are in talks to combine their train operations potentially valued at more than 10 billion, or about $14 billion, according to people familiar with the matter.
The proposed joint venture would merge the firms’ train-making and signalling activities, said the people, asking not to be identified because the discussions are private. A deal could come by the middle of the year, they said. No final decisions have been made and any combination would require clearance from antitrust authorities and face potential opposition from unions, they said.
Bombardier is currently embroiled in a legal battle with Metrolinx over a $770million light rail vehicle order that the GTA’s regional transit authority alleges that the company botched.
In addition, Bombardier was supposed to have delivered more than 100 new streetcars to the Toronto Transit Commission by the end of 2016, under the terms of the original contract.
Instead, it had delivered only 30, after repeatedly missing production deadlines. The TTC imposed service cuts on the public transit system, cuts that the transit agency blamed on the delayed streetcars.
Talks between Bombardier and Siemens started earlier this year, the people said. A combination would help the companies stave off pressure from Chinese competitors, which are expanding internationally and threatening market share.
Analysts from Société Générale SA have valued Siemens’s mobility unit at about € 7.2 billion.
Meanwhile Veritas Investment Research Corp. has said Bombardier’s 70-per-cent stake in its transportation business is worth at least $5 billion (U.S.).
Representatives for Siemens and Bombardier declined to comment.
Bombardier sold a 30-per-cent stake in its train business to fund manager Caisse de dépôt et placement du Québec last year, valuing the unit at $5 billion and helping the Montreal-based firm raise capital as it faced a cash drain from delays.
Still, antitrust concerns facing the two Europe-centred companies could be an obstacle to the deal, according to Invest Securities SA analyst Jean-Louis Sempe.
Siemens and Bombardier would also likely have to win over support from labour representatives, who would object to job cuts. Bombardier’s rail unit is set to bear the brunt of a company-wide plan to cut as many as 7,500 jobs by the end of 2018.
Moving its mobility division into joint venture would further pare down the sprawling Siemens con- glomerate, which until a decade ago consisted of more than a dozen units making everything from mobile networks to light bulbs.
Siemens makes the ICE high-speed train which connects German cities such as Cologne, Berlin and Munich. The division also makes city trams and signalling equipment. Siemens’s mobility unit has been dogged for years by charges and severance payments as it cut employees, prompting recurring speculation that the company may seek a partner such as Bombardier or Alstom SA, the French maker of the TGV trains.
Siemens’s bid to buy Alstom failed amid a competing offer from General Electric Co., which ended up buying Alstom’s energy-generation assets.