Alstom, Siemens merge to create new European rail champion

Siemens likely to pick Alstom for rail merger, not Bombardier

The producers of the TGV and ICE high-speed trains wanted to grow by more than 4 percent per year together and achieve combined revenue of more than 20 billion euros (23.45 billion US dollars) as "Siemens Alstom" by 2023.

The corporate name of the combined group will be Siemens Alstom and the group headquarters is expected to be in the Paris area of France. Thanks to its global reach across all continents, its scale, its technological know-how and its unique positioning on digital transportation, the combination of Alstom and Siemens Mobility will bring to its customers and ultimately to all citizens smarter and more efficient systems to meet mobility challenges of cities and countries.

Chancellor Angela Merkel's spokesman, Steffen Seibert, said that Germany and France see the decision as a "clear signal" that the European single market "is growing together in companies' reality". The Mobility Solutions business will be run out of Berlin.

Siemens (SIEGn.DE) and Alstom (ALSO.PA) have agreed to merge their rail businesses, creating a bigger second player to China's CRRC (601766.SS), with sales of 15.3 billion euros ($18 billion).

"By combining Siemens Mobility's experienced teams, complementary geographies and innovative expertise with ours, the new entity will create value for customers, employees and shareholders".

The tie-up, set to help the companies counter the rise of China's state-owned CRRC 601776.SS , represents an industrial win for French President Emmanuel Macron, who is proposing sweeping reforms for Europe, including deeper trade cooperation.

The companies expect annual synergies of 470 million euros and Alstom will have to pay a 140 million-euro break up fee if it decides to cancel the transaction.

"It's important for French authorities that the terms are balanced, that includes the role of CEO", a source familiar with the matter said. Siemens Alstom will employ 62,300 people.

Poupart-Lafarge also told analysts that the deal wouldn't impact the two companies' relationships with Bombardier.

Nevertheless, on the Toronto stock Exchange, Bombardier's share closed at $ 2.27 a, up 13 cents, or 6,07 %, even if Washington had not yet indicated whether he was going to impose punitive measures on the CSeries, following a complaint of the Boeing company.

The French government announced that agreement on company, which was made a decision to move center to Paris, is "closer to each or among equals". They are aiming to close the deal by the end of 2018.

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