Merger between Alstom and Siemens is expected to be blocked by regulator

By Ruth Bender and Valentina Pop 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (January 18, 2019).

BERLIN -- A mooted Franco-German rail merger that has been hanging in the balance for months appeared to be on the verge of collapse Thursday after people close to the talks said antitrust regulators and the companies behind the deal had reached an impasse in talks.

The European Commission, the European Union's competition enforcer, was expected to block the merger between the train-making operations of France's Alstom SA and Germany's Siemens AG if there aren't fresh concessions by the companies to allay its concerns that the deal would harm competition, European officials said.

But a person familiar with the negotiations said industrial conglomerate Siemens wouldn't submit new proposals after deciding these would defeat the deal's economic rationale.

"If the commission refuses, we can't do the deal," said the person. "We've pushed this to the edge."

A commission spokesman declined to comment on the coming decision and said the investigation was still ongoing. Alstom Chief Executive Henri Poupart-Lafarge said on a conference call Thursday that the company believed the proposed remedy package was adequate to address the concerns of the commission. He declined to comment on details of the talks with the Commission.

A collapse of the deal would mark a defeat for advocates who have been calling for a European train champion able to counter growing competition from China, on the model of aerospace giant Airbus SE.

Alstom, maker of French high-speed train TGV, and Siemens, which makes the high-speed ICE trains, had pitched the merger of their rail operations as a necessity to compete in the future with Chinese rail giant CRRC Corp., the world's largest rail supplier.

But opposition to the deal had grown louder in recent weeks.

Competition commissioner Margrethe Vestager has repeatedly warned that the combination would hinder competition in Europe on the market for trains and signaling systems. Several national competition authorities, including Germany's own Bundeskartellamt, have raised objections to the merger, along with railway associations and trade unions in France.

Backers of the deal, both in France and Germany, have warned that blocking the deal would be a strategic mistake.

"A refusal from the European Commission would be an economic and a political mistake," French government spokesman Benjamin Griveaux said at a weekly press conference Wednesday.

Germany's influential BDI industry lobby Thursday also warned that the deal's demise would raise doubts about the prospects of European leaders emerging in other critical areas. BDI President Dieter Kempf said that besides Siemens and Alstom, only the Chinese were competing in the market for ultra-high-speed trains.

"I will leave it up to your fantasy to imagine what might happen if the Franco-German merger doesn't go through," he said.

At a closed-door meeting of all 28 EU commissioners on Tuesday, Ms. Vestager laid out her objections to the merger and faced no objections from her colleagues, according to people familiar with the discussion, suggesting she had cleared all internal hurdles to block the merger. The decision is expected by Feb. 18.

Siemens is ready to consider alternative options for its rail business if the deal is blocked, including an initial public offering of its Siemens Mobility business, the person familiar with the company said. Mr. Poupart-Lafarge said Alstom wasn't working on a plan B but was focused entirely on plan A.

"Everything is known and on the table, now it's time to make a decision, " he said.

--Olaf Ridder contributed to this article.

Write to Ruth Bender at Ruth.Bender@wsj.com and Valentina Pop at valentina.pop@wsj.com

Corrections & Amplifications An earlier version of this article misspelled the name of Chinese rail giant CRRC Corp. as CCRC Corp. (Jan. 17, 2019)

 

(END) Dow Jones Newswires

January 18, 2019 02:47 ET (07:47 GMT)

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