Siemens, Bombardier in talks about rail JV: sources

Tue Apr 11, 2017 4:45pm EDT
 
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By Alexander Hübner and Andrea Shalal

FRANKFURT/BERLIN (Reuters) - Germany's Siemens (SIEGn.DE: Quote) and Canada's Bombardier (BBDb.TO: Quote) are in talks to combine their rail operations, two people close to the matter told Reuters on Tuesday, an action that could strengthen their hand against Chinese state-backed market leader CRRC Corp (601766.SS: Quote).

The joint venture would create a company whose combined sales of $16 billion would be half those of CRRC (601766.SS: Quote), the result of a 2015 merger of China's top two players, and would leave France's Alstom (ALSO.PA: Quote) out of the industry's consolidation.

Rail consolidation has been a trend over the last few years, as global companies seek to contain costs and Western companies struggle with the rising ambitions of China at home and abroad.

The top three runners-up - Bombardier, Siemens and Alstom - have talked to each other about combining their businesses in various arrangements over the past years. This would be the third attempt by Siemens and Bombardier, one of the people said.

"Talks are occurring and are already pretty far advanced," said one of the sources, who asked not to be named because the negotiations are confidential.

Siemens and Bombardier, also a maker of aircraft, declined to comment, as did Canada's second-largest pension fund, Caisse de depot et placement du Quebec, which owns 30 percent of Bombardier's train business.

The news, earlier reported by Bloomberg, lifted Siemens shares to a record 129.80 euros. The stock later slipped back. Bombardier shares rose 6.7 percent to 2.37 Canadian dollars.

Despite positive market reaction, analysts said antitrust concerns in Europe remain the biggest threat to a deal. The combination also faces potential opposition from unions in the run-up to Germany's fall elections.   Continued...