French transport manufacturer Alstom agreed Monday (17 February) to buy the rail division of Bombardier, in a move that would create the world’s second-largest train manufacturer and a potential competitor to China’s state-owned rail manufacturing behemoth. However, EU competition regulators must first give the green light. Alstom, the manufacturer of France’s high-speed TGV trains, offered to pay up to €6.2 billion euros in a mix of cash and shares for the cash-strapped Canadian firm’s rail division, according to a memorandum of understanding signed between the firms.
European train manufacturers have been trying to build scale to compete with China’s state-owned China Railway Construction Corporation (CRCC), the world’s largest train manufacturer. Last year, Alstom tried to merge its rail manufacturing with that of German industrial giant Siemens, but Brussels prevented the deal from coming to fruition, ruling that a merged company would have dominated the European market at the expense of consumers. This time around, Alstom Chief Executive Henri Poupart-Lafarge is optimistic, saying that the Bombardier deal was different than that failed Siemens merger and that regulatory hurdles were “not a huge issue.”
French Finance Minister Bruno Le Maire is due to meet with EU’s competition commissioner Margrethe Vestager on Tuesday (18 February) to discuss the deal. France was critical of the EU’s decision to block last year’s merger attempt, and supports the potential Alstom-Bombardier merger. “This deal will allow Alstom to prepare for the future, against the backdrop of increasingly intense international competition,” Le Maire said. Meanwhile, Germany’s largest labor union, IG Metall, condemned the potential merger in a press release, and said EU anti-trust regulators should evaluate the deal in the same manner as the attempted Alstom-Siemens merger.
