• / Free eNewsletters & Magazine
  • / My Account
Home>Alstom, Siemens Announce Merger to Create European Train Giant -- 4th Update

Alstom, Siemens Announce Merger to Create European Train Giant -- 4th Update

Alstom, Siemens Announce Merger to Create European Train Giant -- 4th Update

09/27/2017

 By Matthew Dalton 

PARIS--German industrial company Siemens AG on Tuesday agreed to merge its rail operations with French train maker Alstom SA, aiming to create a European giant with the scale to fight growing competitive threats from state-backed Chinese rivals.

Shares in Alstom opened more than 8% higher Wednesday, while those in Siemens were up 1%.

Under the deal, Siemens will have majority control of the new company, receiving slightly more than 50% of its shares, officials from Alstom and Siemens said. Alstom shareholders will receive two special dividends totaling EUR1.8 billion ($2.13 billion): EUR4 a share for surrendering control of the company and EUR4 a share as an "extraordinary dividend," the companies said.

The proposed merger marks a major test of Europe's ability to overcome national economic rivalries and establish a European champion, akin to Airbus SE in aviation. The deal faces the risk of political backlash in France, where Alstom's factories have been a symbol of national industry for more than a century.

Yet the merger has strong backing from French President Emmanuel Macron, who has argued that Europe needs to cooperate across borders to compete better against economic powers in China, the U.S. and elsewhere. The deal echoes the political overtures Mr. Macron is making to German Chancellor Angela Merkel to bolster the eurozone economy by establishing a shared budget for the currency bloc.

"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," said Siemens Chief Executive Joe Kaeser.

Alstom Chief Executive Henri Poupart-Lafarge on Wednesday expressed confidence that the deal would receive antitrust approval.

"This is a large deal, so it's no surprise that it will be looked at closely by the European Commission. We are confident," he said on a call with analysts.

©2017 Morningstar Advisor. All right reserved.