Siemens is in talks to merge its rail business with that of either Alstom or Bombardier and will pick a preferred partner within days for further negotiations, a person familiar with the matter told Reuters on Thursday.
Rail mergers have become a trend over the last few years as global companies seek to contain costs and Western ones struggle with competition from China’s state-backed CRRC Corp. The three main rivals to CRRC, Bombardier, Siemens and Alstom, have talked to each other about combining their businesses in various arrangements over the past years.
Sources told Reuters in July that Canada’s Bombardier and Siemens were in the final stages of talks to combine their rail operations.
Under an alternative scenario involving Alstom, Siemens would transfer its rail operations to the French group and become a majority shareholder of Alstom, the source told Reuters on Thursday.
However, a person close to Alstom said that by engaging with the French group Siemens was trying to get leverage in its discussions with Bombardier. “Bombardier is still the more likely outcome and easier to get done,” that person said.
Alstom, while initially fine to stay on the sidelines of the ongoing consolidation, has since decided to at least assess its options including a deal with Siemens, the person added.
Siemens and Alstom were engaged in a bitter fight in 2014, when Siemens tried to muscle in on General Electric’s 12.4 billion euro acquisition of Alstom’s power business. Ever since, people close to the companies have described relations as strained.
Shares in Alstom climbed as much as 2.6 percent on news of the talks, first reported by Bloomberg earlier on Thursday. Siemens was up 0.8 percent at 116.90 euros.
Siemens declined to comment and officials at Bombardier Transportation in Berlin were not immediately available for comment. An Alstom spokesman said he had no immediate comment.
Last month, Siemens and Bombardier were on the brink of sealing a deal to create two separate joint ventures for their signaling and rolling-stock divisions, but the talks hit last minute snags, sources said at the time.
According to the blueprint of that deal, Bombardier would take just over a 50 percent stake in the joint rolling stock operations, one source said. Siemens would take roughly an 80 percent stake in a joint venture in higher-margin signaling technology.
Update: Caisse de dépôt et placement du Québec owns 30 percent of Bombardier’s train business. The Canadian pension fund made a $2.1 billion (US$1.5 billion) convertible share investment in the unit in 2016.
By Alexander Hübner
(Additional reporting by Arno Schuetze, Blandine Henault, Georgina Prodhan and Maria Sheahan; Editing by Richard Lough and Mark Potter)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of Siemens AG