Siemens and Alstom to join rail forces

MONTREAL — European railway manufacturers Siemens Mobility and Alstom announced a merger Tuesday that leaves Montreal-based Bombardier Transportation facing a new “European champion” and a substantially larger rival.

The memorandum of understanding announced Tuesday is described as a merger of equals with each owning half the shares of the new company to be headquartered in Paris. The Mobility Solutions business will be run out of Berlin.

The combined company to be called Siemens Alstom will have US$18 billion in revenues — about double that of Bombardier Transportation — and US$1.4 billion in adjusted EBIT. Annual cost savings of US$554.2 million are expected four years after closing.

The new European firm with 62,300 employees in more than 60 countries will have an order backlog of US$72 billion and an adjusted margin of eight per cent.

“We put the European idea to work and together with our friends at Alstom, we are creating a new European champion in the rail industry for the long-term,” Siemens CEO Joe Kaeser said.

He added that the global market has changed with the creation of a dominant competitor in China and digitalization.

Bombardier (TSX:BBD.B) didn’t immediately respond to the merger of its rivals. It is also believed to have talked to Siemens.

Mergers in China and Europe leave Bombardier “still looking for a dance partner,” said David Tyerman of Cormark Securities.

“They lost out this time but there’s presumably going to be more consolidation,” he said, noting competitors of varying sizes remain around the world.

Bombardier’s shares closed up more than six per cent to C$2.27 in Tuesday trading even though it was expected to face bad news affecting both its commercial aircraft and railway businesses.

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