Home Business Major rail merger hits the buffers but another is set to reach...

Major rail merger hits the buffers but another is set to reach its destination

After 16 months of toil, the fate of the planned European rail giant Siemens Alstom was revealed on February 6.

Unresolved concerns surrounding its impact on competition and the price of signalling and very high-speed trains proved fatal as the European Commission vetoed the move, despite concessions being made.

Commissioner Margrethe Vestager, in charge of competition policy, said: “Millions of passengers across Europe rely every day on modern and safe trains. 

“Siemens and Alstom are both champions in the rail industry. Without sufficient remedies, this merger would have resulted in higher prices for the signalling systems that keep passengers safe and for the next generations of very high-speed trains. 

“The Commission prohibited the merger because the companies were not willing to address our serious competition concerns.”

Alstom described the decision as “a clear set-back for industry in Europe”.

Globalisation: opportunities and threats

Both parties had stressed that the combined company would have created a European player with the ability to cope with growing competition from non-EU companies.

Globalisation of the rolling stock market has created opportunities for both but it has also led to increased competition from countries such as South Korea, Japan and China – particularly the world’s dominant rail equipment supplier CRRC – which themselves are not open to competition. 

As a result of the decision from Brussels, the merger – which was backed by both the French and German governments and would have seen the creation of a new entity with a turnover of €15.3 billion and 62,300 employees in over 60 countries – will no longer proceed.

The ORR’s stance

During its lengthy investigation, the European Commission received negative comments from customers, competitors, industry associations and trade unions, including Britain’s Office of Rail and Road.

Responding to the news, it released the following statement: “We’ve made it clear from the outset that this was a bad deal for British passengers, freight customers and taxpayers. 

“We are pleased to have played an important role, alongside colleagues at the Competition and Markets Authority, in persuading the Commission to reach the same view and block this tie-up, protecting vital competition for the supply of signalling and high speed rolling stock.”

When the merger was announced in 2017, Alstom chief Henri Poupart-Lafarge initially said the two believed there was “no fundamental risk”.

Siemens said it will now “take the time to assess all options for the future of Siemens Mobility”. Alstom meanwhile said it will “project itself into a new future and define a strategic roadmap including appropriate capital allocation”.

Speculation has already begun as to whether the decision will refuel potential tie-up talk with Bombardier, which benefited from a lift in its shares following the European Commission’s decision. 

Merger set to close 

Elsewhere, another merger of two rail sector juggernaughts looks set to be completed. 

Subject to certain conditions, plans for Wabtec to merge with long-term client GE Transportation will close on February 25.

Should the $11.1 billion move – which will see GE Transportation merge with a wholly owned subsidiary of Wabtec – go ahead, it will represent the latest in a long list of specialist companies acquired by Wabtec in its 150-year history. This includes British company Brush Traction Group, known for locomotive overhauls, services and aftermarket components, as well as French firm Faiveley Transport, a leading global provider of value-added, integrated systems and services.

As a result, the combined business will become the world’s fifth largest railway equipment supplier behind CRRC, Siemens Mobility, Alstom and Bombardier Transportation. 

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