What will the merger mean?
The idea of a merger of Siemens’ and Alstom’s rail businesses is not new, but previous initiatives have all foundered.
However, the global rolling stock and signalling markets have changed massively in the past decade, with growing competition from European manufacturers such as CAF and Stadler - and more importantly from China’s booming rail sector.
CRRC is the world’s biggest rolling stock builder and has been making inroads into markets that a decade ago Siemens, Alstom and Bombardier would have considered strongholds, such as Australia, South Africa and parts of Europe.
In the past, the attraction of buying from China was low-cost, but train builders have rapidly improved the technology and build quality of their products to the point where they are genuine rivals to Europe’s traditional manufacturers.
Rolling stock inevitably draws the headlines - and both companies are keen to point out that their ranges complement each other’s - Alstom is traditionally stronger in the Middle East and Africa, India and mid-South America, while Siemens is better placed in China, the United States and Russia.
Equally, the varying platforms for metro, light rail, conventional rail and high-speed rail are very different, and for the time being it seems there is little likelihood of rationalisation, although this is likely to change in the longer term.
At a press conference in Paris on September 27, Siemens President and Chief Executive Joe Kaeser said the new company would harmonise technical development. The implication is that for rolling stock and signalling - another area where both companies compete - in time there will be fewer products from the company, removing internal competition.
For customers, it is unclear what the effects of the merger will be. While from Alstom’s and Siemens’ perspective the perceived economies of scale look attractive, the reduced level of competition in the marketplace could be unattractive for buyers of rolling stock and signalling systems.
Perhaps Kaeser’s comment in the press conference offered another insight into the reasons for the merger.
When he said: “The SiemensAlstom merger will be living proof that we can get things done in Europe,” there may have been a political message at a time when the European Union is under pressure.
“The European spirit is alive,” he added. Faced with rapidly increasing competition, a merger of its two biggest rail businesses provides the EU with scale to take on the Chinese. That spirit is being tested as never before.
shareholder Bouygues - it will vote in favour of the transaction at the Alstom’s board of directors and at an extraordinary general meeting deciding on the transaction, to be held before July 31 2018.
The French Government also supports the transaction based on undertakings by Siemens, including a standstill at 50.67% of Alstom’s share capital for four years after the merger is completed and certain governance and organisational and employment protections.
The French Government says the loan of Alstom shares from Bouygues will be terminated in accordance with its terms no later than October 17 2017. For its part, Bouygues has committed to keep its shares until the earlier of the extraordinary general meeting deciding on the transaction and July 31 2018.
In France, Alstom and Siemens will initiate Works Councils’ information and consultation procedure according to French law, prior to the signing of the transaction documents.
If Alstom were not to pursue the transaction, it would have to pay a 140 million euros (£124m) breakfee clause.
The merger is subject to clearance from regulatory authorities, including foreign investment clearance in France and anti-trust authorities as well as confirmation by the French capital market authority (AMF), that no mandatory takeover offer has to be launched by Siemens following completion of the contribution. Closing is expected at the end of 2018.